More than 13 thousand amendments were submitted to the bill No. 2571-d “On Amending Certain Legislative Acts of Ukraine concerning the Improvement of Certain Mechanisms for Regulation of Banking Activities”. This was announced by the deputy head of the "Voice" faction, the first deputy head of the Rada Committee on Finance, Tax and Customs Policy, Yaroslav Zheleznyak.
“As of 18:00 there are already more than 13 thousand amendments to the law on banks 2571-d. And this is not all amendments. Therefore, I congratulate us, it seems that the absolute record of parliamentarism will be broken twice, ”he wrote on his Facebook.
According to him, a certain non-factional deputy filed more than 6 thousand amendments on his behalf, and also “there are still three packages of 1.5 thousand amendments.”
At the same time, Ukrainian media, in particular, the Strana.ua portal, reported a record 16 thousand amendments.
At the same time, the first deputy of the “Servant of the People” party faction in the Verkhovna Rada, Aleksandr Kornienko, noted that opponents of the legislative initiative could appeal the document to the Constitutional Court of Ukraine if opponents of the law collect 45 signatures.
Moreover, the resistance to the bill is much weaker than that which the law on opening the agricultural land market had, the Kornienko said.
- Deputies of the Verkhovna Rada of Ukraine during the meeting
- RIA News
As noted earlier by the head of the parliamentary faction of the Party of the Servant of the People David Arahamia, three options are currently being worked out for the consideration by the Rada of thousands of amendments introduced to the bill.
Firstly, the ruling party may agree with the authors of the amendments to withdraw their proposals, although this is an unlikely scenario. Secondly, you can only consider the table of amendments adopted by the relevant committee, ignoring the amendments made in the hall.
“The third strategy is to sit at night, three, five, ten nights to sit and undergo corrections in such a way as we passed on the ground,” the deputy said.
Systemic risks
Recall that the draft law on banks was submitted to the Ukrainian parliament on March 23 by the government. Subsequently, the Party of the Servant of the People party and President Vladimir Zelensky publicly called on the Rada to support the document.
On March 30, the Rada adopted the bill on first reading. In support of the document, 267 deputies from the factions of the Golos, European Solidarity and Servant of the People factions voted.
In its current form, the bill excludes the possibility of canceling the decision of the National Bank of Ukraine on the nationalization or liquidation of banks.
- Igor Kolomoisky
- Reuters
- © Valentyn Ogirenko
The explanatory note to the document says that a significant part of the decisions of the National Bank on the withdrawal from the market or liquidation of banks has become the subject of legal claims. Some of the proceedings ended in favor of the former owners of banks and led to the cancellation of decisions of the financial regulator.
This situation does not correspond to world practice, the authors of the bill note. Even if the decision to withdraw such a bank from the market is canceled, the financial institution should not restore its work, protecting the interests of its owners can be limited only to compensation for damage.
The authors of the document recall that since 2014, the procedure for withdrawing banks from the market has been applied to 104 banks. Despite this, some of them are trying to resume work, using the imperfections of the judicial system.
“This creates systemic risks for financial stability, because the judicial system is used by the owners of non-viable banks as a quasi-privileged instrument, which eliminates all efforts of the National Bank aimed at improving and cleaning the banking system of Ukraine,” the explanatory note says.
First of all, the law may affect the interests of the former head of the Dnipropetrovsk Regional State Administration, oligarch Igor Kolomoisky. Recall that in 2016, the Ukrainian Cabinet decided to nationalize the largest credit and financial organization in the country - PrivatBank. At that time, the bank owned the second largest branch network and the largest ATM network among Ukrainian banks. At the time of nationalization, 41.6% of the structure's shares belonged to Igor Kolomoisky, another 33.2% - to his partner Gennady Bogolyubov.
The government explained its decision by the need to save the bank from collapse, which could hit the entire financial system of Ukraine. After the bank became state property, the authorities recapitalized it first to the amount of 116.8 billion hryvnias, and then another 38.5 billion hryvnias.
- Reuters
- © Gleb Garanich
The government accuses the former owners of the bank that shortly before nationalization, they withdrew billions of dollars from its accounts. For his part, Kolomoisky argues that it was the country's authorities who deliberately created the prerequisites for the crisis of the financial structure in order to use this situation as an occasion for nationalization.
Former owners are involved in litigation against the Ukrainian government. In 2019, the Kiev Regional Administrative Court ruled in favor of the Triomal Investments Ltd company controlled by the Kolomoisky Cyprus company, having recognized the privatization procedure of PrivatBank as illegal. However, then-President of Ukraine Petro Poroshenko criticized this verdict and called on law enforcement agencies to check the judges for violation of the law.
Kolomoisky himself had previously stated that he did not demand to return his share in the bank. Instead, the oligarch is ready to accept $ 2 billion compensation from the state.
However, the authorities are in no hurry to fulfill this requirement of the oligarch. On the contrary, in early April, the state-owned PrivatBank filed a lawsuit against its former owners in the amount of $ 5.5 billion in Cypriot jurisdiction.
“This lawsuit is related to dubious transactions that were conducted in PrivatBank from 2013 to 2016,” explained Roman Sulzhik, a member of the bank’s supervisory board.
Oligarchic stage
If the law on banks is not adopted, Kiev will not be able to receive the next loan tranches from the IMF. The adoption of a norm prohibiting the return of large nationalized banks to the hands of former owners, as well as the lifting of the moratorium on the sale of agricultural land, are conditions for Ukraine to provide additional financial support.
The country is in dire need of external assistance, otherwise Ukraine may face default, experts say. At the end of last year, the volume of public debt and the government-guaranteed debt of Ukraine reached $ 84.4 billion. In this case, the maximum payments on external debt in 2020 will fall on the first and third quarters ($ 5.415 billion and $ 5.237 billion, respectively). In total for the current year, Kiev should transfer $ 17.059 billion to creditors. At the same time, the situation has deteriorated sharply due to the coronavirus pandemic.
- International Monetary Fund Headquarters
- Reuters
- © Yuri Gripas
“For Ukraine, there is a risk of default, the Zelensky administration is forced to listen to the requirements of the fund and go against Kolomoisky,” Vladimir Zharikhin, deputy director of the Institute of CIS Countries, said in an interview with RT.
A similar opinion is shared by the RT source in the Ukrainian Ministry of Finance.
“Coronavirus will hit the country's economy very painfully. The budget deficit will grow three times and amount to 7-8% of GDP, whereas last year it was 2% of GDP. If the program with the IMF is nevertheless signed, then Ukraine may additionally receive funds from the World Bank and the European Union. But lenders are demanding that the “anti-Colomian” law be adopted, and problems arise with this, ”the source noted, adding that he has no idea how the Rada will gather deputies to vote on thousands of amendments.
Speaking about why the IMF insists on the adoption of this law, Andrei Suzdaltsev, Deputy Dean of the Faculty of World Economy and World Politics at HSE, explained that Ukrainian lenders are worried about oligarchic activity in the country.
“The Ukrainian market economy has stopped at the oligarchic stage, the IMF is trying to push Kiev out of the rotten oligarchic stage with such proposals. However, these initiatives are not indisputable, because, pushing through such laws, the IMF calls into question the sovereignty of Ukraine, ”the expert said in an interview with RT.
“Go against Kolomoisky”
The banking law, like the land law, did not receive the support of opposition party leaders. According to Yulia Tymoshenko, the adoption of the law will violate the “status of Ukraine as a rule of law”. In turn, the chairman of the Political Council of the Opposition Platform - For Life party, Viktor Medvedchuk, believes that the law violates the rights of the former owners of about a hundred nationalized banks in recent years, which would lose the opportunity to challenge the decision of the authorities.
Opposition representatives believe that the Ukrainian authorities showed excessive pliability in a dialogue with the IMF - the West would still not have allowed the country to default.
- President of Ukraine Vladimir Zelensky
- Reuters
Experts do not exclude the possibility that even if the law is passed, the former owners of PrivatBank will be able to achieve their goal by suing the state for monetary compensation. A similar opportunity is inherent in the current bill, Denis Denisov, director of the Institute for Peace Initiatives and Conflictology, said in an interview with RT.
“No one will be surprised if it turns out that the law will become a formal curtsy of Kiev in the direction of the IMF in order to receive financial assistance. But at the same time, thanks to loopholes in the law, Igor Kolomoisky will be able to receive compensation for lost assets in the future, ”the expert suggested.
At the same time, the situation with the adoption of the law on banks is now not in favor of Vladimir Zelensky, said a RT source in the European Solidarity party.
“Zelensky had to go against Kolomoisky in order not to lose the support of the West. But now he has found himself in a difficult situation: the amendments will have to be considered for at least six months, and then if the deputies manage to get to the meeting, the president loses influence on the parliament. Meanwhile, Kolomoisky is suing the state, there is a real threat that he will receive compensation or even return the bank, ”the source said.
At the same time, even the adoption of a law on banks does not guarantee Ukraine large-scale support for the West, capable of permanently stopping the country’s slide into a debt crisis, says Andrei Suzdaltsev.
“It is beneficial for the West that Ukraine balance on the verge of default, because the Ukrainian leadership in this situation is quite malleable, manageable,” the expert summed up.