How we helped
The geopolitical crisis of 2014, and the resulting severe economic disruption, highlighted the already existing governance and economic weaknesses in Ukraine’s banking sector. Brave steps were taken by the new banking authorities to clean up the system, with more than one third of banks closed. However, by far the largest systemic challenge remained unaddressed.
PrivatBank represented 30% of all retail deposits in the country, over 60% of retail card payments, and its services were utilized by 45% of the population. The National Bank of Ukraine (NBU) had identified that imprudent and potentially fraudulent lending practices had resulted in nearly the entire corporate loan book being irregular, likely irrecoverable, and related to the then ultimate beneficial owners of the bank.
This resulted in PrivatBank having a capital shortfall of at least US$5.5 billion. With Ukraine continuing to rely on support from the IMF and international partners to reform and revitalize its economy, urgent action was needed to prepare for a likely nationalization of PrivatBank.
Stabilizing PrivatBank to avoid financial collapse of the economy
As the full magnitude of the challenges became increasingly apparent during the course of 2016, AlixPartners was engaged by the authorities to assist in planning for an orderly transition to nationalization. This included:
- Assessing the various legal and economic options available to nationalize and stabilize PrivatBank
- Reviewing business continuity and viability, and post-nationalization governance and management
- Identifying actions necessary to preserve IT infrastructure and mitigate cyber-security risks
- Project leadership and support to the authorities in crucial negotiations with key stakeholders.
In December 2016 PrivatBank was successfully nationalized, in a smooth transition with limited impact on depositors and markets, and to strong acclaim from international partners.