Ukraine will sell two large state-owned banks at once: the IMF told which ones

Ukraine will prepare 2 state-owned banks for privatization at once – Sens Bank and Ukrgasbank. To this end, a consultant will be selected by the end of May to propose a comprehensive action plan for the sale.

This is stated in the updated Memorandum of Ukraine with the IMF. It emphasizes that the main criterion for selection will be international experience in selling financial institutions.

"We will prepare the two systemically important state-owned banks, Sens Bank and Ukrgasbank, for sale by selecting and appointing an internationally recognized financial advisor using a transparent procedure by the end of May 2024. And with the participation of the International Finance Corporation (IFC) as an observer," the document emphasizes.

Also, it is noted that all state-owned banks that belong to the category of systemic banks will be under the control of the Ministry of Finance. And any non-systemic banks that are in state ownership

• will not be recapitalized using budgetary resources;
• will be transferred to the Deposit Guarantee Fund to take measures in case of violation of prudential requirements.

In addition, as part of the preparations for privatization, the Ministry of Finance should update the draft law on the privatization of state-owned banks from 2012. The updated document should be submitted to the Verkhovna Rada by the end of March 2024.

Why state-owned banks are being sold

After the nationalization of Sens Bank (formerly Alfa-Bank Ukraine), the share of state-controlled banks in the market increased to 56%. This is a very high figure: according to international experience, it should be limited to no more than 25%.

It is believed that the state is a less efficient owner than private business. In addition, the concentration of financial institutions in the hands of the state can lead to distortions in the banking market.

Against this background, the IMF recommendations have long called for the sale of state-owned banks in Ukraine. Previously, the privatization process was planned for 2024. But the full-scale war changed these plans.

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