Ukraine: Largest bank nationalised to preserve financial stability

Posted by on Jan 28th, 2017 and filed under Allgemein, Breaking News, Markets. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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Ukraine authorities took over PrivatBank in order to preserve financial stability in the country. Indeed, the problems faced by the bank, which have accumulated over the last few years, have recently deteriorated according to the central bank of Ukraine.

These problems were mainly caused by imprudent lending policies such as related-party lending, which led to capital losses. Moreover, the recapitalisation programme was never implemented.

Following the nationalisation of PrivatBank, the IMF stated that the nationalisation of the bank is an important step in the efforts to safeguard financial stability.

Impact on country risk

The nationalisation of PrivatBank, Ukraine’s biggest bank, was aimed at preserving financial stability. The cost of the rescue is likely to weigh on the budget that was approved by parliament in December.

In this context, a new tranche of the IMF loan is likely to be approved in the forthcoming months.

Despite economic recovery in 2016 following years of deep contraction, the commercial risk remains elevated not only due to relatively high real financial costs but also as access to credit remains very difficult (credit growth remains deeply negative).

Despite capital controls, the exchange rate remains under pressure despite a small but growing current account deficit (-1.5% of GDP expected in 2016 and -2.1% in 2017). What is more, the business environment remains difficult partly due to the high level of corruption.

Credendo Group accepts no liability for errors or omissions. The views expressed herein are the author’s personal views and are not intended to reflect the views of Credendo Group. Credendo Group will not be liable for claims or losses of any nature arising directly or indirectly from use of the information, data, documentation or other material from this report. The texts and  illustrations can be printed for private use; distribution is permitted only after authorisation by Credendo Group. Quotations are permitted provided that reference is made to the valid source. Reproductions are permitted provided that reference is made to the valid source, unless for commercial aims, in which case reproduction, even with source indication, is not permitted.

Pascaline della Faille – Credendo Group


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