The State Deposit Guarantee Fund of Ukraine (DGF) responds to a proposal by the former owner of VAB Bank and Financial Initiative Bank of a debt settlement deal through restructuring. DGF finds the deal optimal for the State. Reports Ukrainian News
This is stated in a reply to a proposal made by Oleg Bakhmatyuk. The proposal offers to settle the debt that was created during the 2014-2015 banking crisis, which brought about the demise of over half of all Ukrainian banks. Oleg Bakhmatyuk offers to repay UAH 8 billion over 5 years. The DGF considers this proposal to be optimal and consistent with international best practices. Such an amicable settlement makes more sense for the State than resolution through litigation, which could consume up to 25% of potential damages in litigation costs, with the litigation itself potentially dragging on for years.
In its letter, the DGF notes that ‘[it] supports such amicable settlement initiatives by the former owners of failed banks and their related parties. But there is no legal mechanism in place currently that would make it possible to accept such a proposal.’
The DGF further acknowledges that the creation of such a legal mechanism through the adoption of a special law would increase debt recovery by the creditors of failed banks and as a result serve as a source of revenue for the Ukrainian government.
‘The DGF is prepared to take on a leadership role and equip any parties that have the right to propose new legislation with ample expertise to help design viable mechanisms and bring Ukrainian laws into conformity with international best practices within the shortest possible time’, concludes Svitlana Rekrut, Executive Director of the DGF in her letter.
FYI: On 15 April, the owner of the Ukrlandfarming and Avangard group, Oleg Bakhmatyuk, proposed to the Cabinet of Ministers of Ukraine, the State Guarantee Fund of Ukraine, the National Bank of Ukraine and the Office of the Prosecutor General of Ukraine a UAH 8 billion debt restructuring deal for VAB Bank and Financial Initiative Bank, which were removed from the market during 2014-2015, following international best practices supported by international financial institutions, e.g. the IMF and the World Bank.