Slovyansky Bank closed

The National Bank of Ukraine (NBU) and the State Tax Administration of Ukraine (STAU) have told journalists a passionate story of the death of what once was one of Ukraine’s leading banks. What drew special attention to this case was an unhidden close relationship that the Slovyansky Bank maintained in 1996- 1997 with the United Energy Systems of Ukraine Corporation run at the time by the just fired Vice Premier Yuliya Tymoshenko. However, the current investigation into the case of this bank has not revealed any involvement of Ms. Tymoshenko in its work, STAU deputy chairman Ihor Kalnychenko explained.

Mr. Kalnychenko said he does not care at all about this bank as such. His only goal is to defend the interests of the cheated depositors. The bank’s debts to natural persons exceeded UAH 91.9 million at the beginning of this year. In the period the bank was run by an NBU-appointed caretaker management, the debts dropped by UAH 2.4 million, but, as we see, it is still too far from full debt redemption. Meanwhile, Slovyansky was increasingly approaching ruin and squandering its resources, instead of earning money. Hence, in the NBU’s and STAU’s common opinion, further existence of the bank only stood in the way of returning debts to the depositors. In 2000 the bank suffered a UAH 325 million loss.

A telling detail is that, according to Mr. Kalnychenko, investigators revealed that one of the Slovyansky top executives appropriated a staggering $300 million over the years the bank functioned. In addition, such dubious operations as issuing so- called blank credits (that is, with no collateral) to friendly firms, super deposit interest rates for certain individuals close to the bank, and suspicious bill of exchange operations became a reliable instrument for personal enrichment and stealing assets.

Meanwhile, the Slovyansky ailment should raise worries in the NBU management not only with respect to the ways of controlling sick banks, whose number in Ukraine is declining very slowly. While 20 out of 195 banks are in a state of financial rehabilitation and special supervision, and 38 in a state of liquidation, only seven have fulfilled financial rehabilitation programs and allowed to work in a routine manner. We must sound the alarm now over the fact that this country’s banking system earned a meager UAH 16.3 million in profit last year against an almost equally negligible (for a large banking system) UAH 512.8 million in 1999.