Consequences of Privatbank Nationalization: Provisional Thoughts

UKRAINE - In Brief 19 Dec 2016 by Dmytro Boyarchuk
The main risk of Privatbank nationalization was in potential adverse reaction of the bank owners. The Central bank officials have been thoroughly working with so called “red button scenario” which presumed potential damage to the datasets of clients. It was the main concern of state officials in this story since that would mean irreversible damage for millions of clients. However, as we see from public statements of top management of Privatbank some agreement was reached on peaceful transfer of the bank to the state. If our observations are correct we see relatively modest consequences of this decision for the economy and for the bank’s clients. There is still a risk of intensified volatility at the FX market since it’s a natural reaction of Ukrainians on any uncertainty. However, we anticipate the situation to stabilize quite soon. There might be some wave of withdrawals with subsequent pressure on FX market but it will be hardly a large-scale tendency given that the state has guaranteed deposits of Privatbank. All in all, it looks like the story has all chances to have happy ending. At the same time our sources at the Central bank confirm provisional information on Eurobonds of Privatbank – bondholders will have zero on those securities.

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