Another bank shuts down in Ukraine due to lack of capital

On January 10, 2017, the National Bank of Ukraine recognized Platinum Bank’s insolvency. It was one of the most scandalous banks in the country. On April 1, 2016, with $7.47 billion worth of holdings it was 24th in terms of assets out of 109 banks operating at the time.

Why Platinum went bankrupt

The official cause for bankruptcy is the inability of the shareholders to raise the bank’s capital. According to the requirements of the NBU, in terms of assets all banks within the 21st to 40th bracket should have provided a positive value of regulatory capital before January 1, 2017. By the end of September 2016 the negative balance of Platinum bank amounted to 162.5 million hryvnia. On December 29, the press service of Platinum reported an infusion of funds worth 120 million hryvnia. Thus, Platinum had not even reached zero balance. According to the NBU requirement, the minimum capital of banks should amount to 200 million hryvnia.

The owners of the bank

Platinum was established in 2005 by the Horizon Capital investment company, which was headed by the former Minister of Finance of Ukraine, Natalia Jaresko. At the time, it was called the International Mortgage Bank.

Since 2013, the owners of the bank have included an Israeli citizen, Gregory Gurtovy and also unofficially Ukrainian millionaire Boris Kaufman, the hotel and construction tycoon. Kaufman admitted to his connection with the bank only in summer 2016, when the National Bank accused Platinum of the lack of transparency of its structure. After that, Kaufman filed for National Bank documents for the approval of the acquisition of a significant number of shares of over 75% through his dummy corporations.

However, the regulator still has not satisfied the businessman's request. The reason for this is "the failure to provide certain documents, particularly the lack of approval of the Anti-monopoly Committee of Ukraine for concentration.” According to the NBU, the Anti-monopoly Committee in December 2016 returned a package of documents for the acquisition of control in PJSC Platinum Bank by Kaufman without consideration.


Many scandals have plagued Platinum in recent years.

Platinum has been embroiled in legal battle with Ukraine mobile operator MTS. The bank refused to return to the operator three deposits worth 250 million UAH, opened in 2014. The company won a lawsuit in Kyiv’s Economic Court of Appeal, but the bank also filed an appeal and the implementation of the decision of the court was suspended.

The Mikhailovsky bank scandal also affected Platinum. Mikhailovsky declared insolvency in May 2016. It opened Platinum the accounts for the Fagor Company. The leadership of Mikhailovsky re-issued 111,000 credit agreements on the eve of the introduction of the interim administration. Fagor eventually demanded money from the debtors but the deal on the re-assignment of the loan agreements was recognized invalid.

Platinum has granted loans to companies that had strong signs of being fictitious. In June 2016, the National Police accused Platinum’s top management of embezzling $1 billion, which appeared to be granted in the form of loans to fake companies controlled by the bank. Criminal proceedings were started with regard to this case.

"Warm" relations with the NBU

The first deputy chairman of the Parliamentary Committee on Finance Policy and Banking, deputy of the Petro Poroshenko Bloc, Mikhail Dovbenko said that the decision to recognize the Platinum bank as insolvent is a delayed decision and shows a selective approach of the regulator to banks.

"The selectivity of the Board of the NBU can be seen in how and who is recognized as an insolvent bank, and when, how and who is withdrawn from the banking sector," Dovbenko said.

Earlier, a financial analyst of the Center of Counteraction to Corruption, Antonina Volkotrub argued that the NBU is really turning a blind eye to Platinum’s violation of standards. "Why? There is an interesting coincidence: Deputy Chairman of the NBU Kateryna Rozhkova, who is responsible for prudential supervision, came to the NBU directly from Platinum," the expert said. Rozhkova headed the bank in 2014-2015.

Rozhkova remained a member of the Supervisory Board of Platinum Bank. At the same time, as evidenced by her Platinum account electronic declaration for 2015, the Deputy of Valeriya Hontareva [head of the NBU] was keeping a deposit amounting to 100,000 hryvnia, and another deposit worth $1,600. According to the NBU, the funds remained on the account of Rozhkova in Platinum and she will receive them in the form of payments of the Deposit Guarantee Fund.

It is interesting that just recently, the regulator provided Platinum with capital worth 240 million hryvnia. On his Facebook page, journalist Roman Bochkala wrote, "The National Police investigation revealed that the NBU has allocated Platinum Bank $240 million under a non-existent guarantee. They could have been checked by NBU Board member Kateryna Rozhkova who, during the issuance and evaluation of these objects, worked as the head of the Board of Platinum Bank."

In the fall of 2016, telephone conversations with Rozhkova and the representatives of financial institutions were made public in which she tries to help shareholders and management to save the bank from bankruptcy. However, the authenticity of these recordings has not been confirmed.

When will the clients get their money back?

In recent years, Platinum offered deposits to Ukrainians with the highest interest rates, 24% per annum in hryvnia at a time when the average rate was 18%. In this way the bank has "collected" the money of the population which will now be returned to the Deposit Guarantee Fund. Thus, 4.8 billion hryvnia from the Fund will be used for paying Platinum Bank clients—a record amount for the past year and a half. 197,000 people or 97% of depositors have a right to receive the payments, which should start at the end of February 2017.

Bankrupt Banks and Deposit Guarantee Fund

Citing a source in the anti-corruption agencies, Ukrainski Novyny reported that the Specialized Anti-corruption Prosecutor's Office started criminal proceedings against the head of the NBU, Valeriya Hontareva and officials of the Deposit Guarantee Fund. The investigation began because of the possible abuse of authority by officials of the above mentioned departments. The basis for the proceedings became the materials of the report of the prosecutor of General Prosecutor's Office of Ukraine, Vladyslav Kutsenko, which had been sent by him to the GPU, the SAP and the National Anti-Corruption Bureau.

Kutsenko’s documents talk about fraud with the assets of the liquidated banks in the amount of about 315.6 billion hryvnia. It's possible that Hontareva and Managing Director of the Deposit Guarantee Fund Konstiantyn Vorushilin are directly involved in the fraudulent scheme. The assets of the liquidated financial institutions could have been artificially understated to sell them cheaply to the entities under their control. Such frauds are associated with the liquidation of 68 banks and failure to repay the money to the clients of the banks.

  Ukraine, banking sector, Platinum Bank