Ukraine's Sense Bank to obtain full-fledged supervisory board, Naftogaz, Ukrenergo supervisory boards to be independently evaluated - memorandum with IMF

MOSCOW. Oct 22 (Interfax) - The Ukrainian Finance Ministry will set up an operational supervisory board for Sense Bank given the uncertainty with the bank's sale process, Ukrainian media quoted the International Monetary Fund (IMF)'s fifth Extended Fund Facility (EFF)'s review.

"Moreover, independent evaluations of the supervisory boards of Naftogaz and Ukrenergo are planned to be launched in November and completed by end-January 2025," the statement said.

As for state-owned banks, the procedure for conducting performance assessments for all state-owned banks should be implemented in 2025, and the Finance Ministry will conduct the first such performance assessment for each of the banks in late July 2025.

"In December 2025, the Finance Ministry will publish the key findings of its first annual assessment, together with the CMU's proposed actions to address the findings," it said.

Additionally, the framework for setting and paying remuneration to senior managers of all state-owned banks should be reviewed by end-December 2024 in consultation with international finance institutions (IFIs) and based on the principles that remuneration should be internationally competitive, consistent, and proportionate to their functions, duties, responsibilities, and considers the part-time nature of their roles and martial law restrictions.

The Memorandum of Economic and Financial Policies also contains Ukraine's renewed commitment to appoint an internationally recognized financial advisor to privatize Sense Bank and Ukrgasbank, both are based in Kiev, by end-December 2024, using a transparent procedure and in consultation with IFIs.

Sense Bank's current five-member Supervisory Board, headed by former head of the European Bank for Reconstruction and Development (EBRD)'s representative office in Ukraine Shevki Acuner, was formed at the time of its nationalization in July 2023. The board has three independent members, whereas, in accordance with the law on banks and banking activities, the state-owned bank's supervisory board consists of nine members, six of whom are independent and three are public members representing the president, the government and the Verkhovna Rada.

The government picked up a recruiter for selecting applicants for membership in the Sense Bank's Supervisory Board, that is, Executive Search Ukraine LLC from the Amrop international chain, on October 4, 2024, based on the results of the competition.

As reported, Ukraine committed to appoint an international consultant for the sale of Ukrgasbank and Sense Bank by the end of September in the EFF updated in June as part of the 4th review of the program, but fulfilling this condition has been postponed to a later date.

Prime Minister Denis Shmygal said in early September that the government is not currently considering the privatization of state-owned Oschadbank and Ukreximbank, the country's second and third largest banks in terms of assets. There is no strategy for their sale, while privatization is planned for Ukrgasbank and Sense Bank, which are ranked fifth and eighth in terms of assets, but it is difficult to say when it will take place.

Additionally, on September 19, the Verkhovna Rada passed a bill on the specifics of the sale of state-owned stakes in the authorized capital of banks, which was submitted to the president for signature on September 25. Hence, another point of the IMF program was implemented in a timely manner.

The largest state-owned bank in the country is PrivatBank, which was nationalized in late 2016. Another two minor banks, First Investment Bank (PINbank) and Motor-Bank, were transferred into state ownership from the sanctioned owners by the Supreme Anti-Corruption Court ruling along with Sense Bank after the crisis broke out. They are ranked 59th and 56th, respectively, among the 62 banks operating in Ukraine in terms of assets. Unlike the five major banks listed above, which are managed by the Finance Ministry, they have been transferred to the State Property Fund for sale. There are also plans to establish a specialized postal bank based on PINbank.

As a result, the total number of state-controlled banks has reached seven. Their share in total assets stood at 55.8% as of August 1, 2024, with earlier announced plans to reduce it below 25%.