The process of privatizing state banks in Ukraine has currently reached a deadlock. Since mid-2024, there have been no active discussions at a high level regarding the sale of state banks, and it is unlikely that any major deals, including the already announced sale of Sense Bank, will take place in the near future.
This is reported by Finway
Reasons for the Halt in Privatization
The main factors causing the slowdown in the reform of the banking sector include a staffing shortage in the Ministry of Finance, which complicates operational work in this area, as well as macroeconomic instability related to military actions. Despite previous active preparations for privatization, there has been no further development on this issue within the government.
In the autumn of 2024, the Verkhovna Rada approved a law regulating the specifics of selling state shares in banks. The new regulations allow for the transfer of any stake, not just a full package of shares as was previously the case, and provide for the involvement of international donors in the process of selecting financial advisors and executing the sale. In particular, for Ukrgasbank and Sense Bank, the selection of advisors is a requirement of the current memorandum between Ukraine and the IMF. This process was planned to be completed by the end of March, but as of June 10, the Ministry of Finance had not disclosed the results.
“In the autumn of 2024, the Verkhovna Rada adopted a law on the specifics of selling state shares in banks. Now the legislation allows for the sale of any stake, not just 100% as it was before, and also provides for the participation of international donors in the selection of financial advisors for the sale and the sale procedure itself. The selection of such advisors for Ukrgasbank and Sense Bank is one of the points of the current memorandum between Ukraine and the IMF. It was supposed to be completed by the end of March, but as of June 10, the Ministry of Finance had not reported on the results,” analysts note.
State Banks as a Source of Revenue for the Budget
Another significant reason for the slowdown in privatization is the necessity of conducting an independent assessment of the quality of banking assets. According to the agreement with the IMF, this procedure is to be carried out by the National Bank with the involvement of independent experts. At the same time, according to the statement of the head of the NBU, Andriy Pyshny, such an assessment can only take place after the active phase of the war has ended.
Analysts also emphasize that state banks have become a much larger source of revenue for the state budget than before the war began. Throughout 2024, these institutions paid $2.1 billion in taxes and dividends, significantly more compared to $1.7 billion in 2021.
Andriy Pyshny, the head of the NBU, stresses that the state should retain ownership of certain banking assets, as there is currently no clear strategy regarding the future of the state share in the banking sector.
At the same time, “Ukreximbank” is the only state bank whose privatization is unlikely. According to Supervisory Board member Victoria Strakhova, this bank serves as the main financial institution for the country’s defense sector. In contrast, PrivatBank, according to analysts, could be sold quite quickly if a corresponding decision is made, as there are banks willing to pay for leading positions in the market.