Ukraine’s National Security and Defense Council (NSDC) has decided to confiscate 99.77% of the shares of Prominvestbank, a financial institution owned by VEB, a Russian state-run bank, reported Kyiv-based news agency Interfax-Ukraine on May 12.
The NSDC passed the same decision on 100% of the shares of the International Reserve Bank, owned by Sberbank, another Russian government-run bank.
President Volodymyr Zelensky has approved both decisions.
These decisions have their business implications as well. VEB is no longer able to claim a debt of UAH 0.93 billion ($31.4 million) that Prominvestbank used to owe it. Meanwhile, the International Reserve Bank has its debt of UAH 14.9 billion ($504 million) to Sberbank cancelled.
All the financial assets, owned by these two financial institutions that used to be subsidiaries of Russian state-owned banks, have now been confiscated. However, the International Reserve Bank will still pay off its UAH 3 billion ($101.5 million) debt to creditors.
The International Reserve Bank has a number of payables on its balance sheet:
- $166 million debt owed by Ukrzaliznytsya, a state-owned railway operator;
- UAH 516.9 million ($17.5 million) debt owed by Elektrovazhmash, a state-owned manufacturer controlled by Ministry of the Economy;
- a UAH 205.1 million ($6.9 million) debt owed by Artem, a defense solutions producer which is a part of the Ukroboronprom defense industry holding;
- a UAH 2.325 bln ($78.7 million) owed by Zarya Mashproekt, another state-owned defense producer.
Meanwhile, Prominvestbank owns a loan issued to Ukrzaliznytsya amounting $231.6 million. Those assets will likely be transferred to the National Investment Fund.
According to the NSDC decision, the Cabinet of Ministers and the Deposit Guarantor Fund, along with the National Bank of Ukraine (NBU), will take care of transferring the shares of these two banks, that had previously been owned by Russian financial institutions, over the course of a 10-day term.
The National Bank had already passed a decision to revoke Prominvestbank and the International Reserve Bank’s licenses on February 25.
Afterwards, the Deposit Guarantor Fund started servicing the private individuals who had money deposited at those banks, paying off their deposits – the ones that did not exceed UAH 200,000 ($6,771).
The NSDC’s decision acted on the NBU’s suggestion at that point, which advocated for the confiscation of the financial assets of both banks, valued at UAH 26 billion ($880 million).
“That’s cash, government bonds, and NBU deposit certificates,” the NBU said in a press release at the time.
The Cabinet of Ministers supported this solution on April 9.