Ukraine to Nationalize Russian Sense Bank

The Central Bank of Ukraine has announced its decision to nationalize the Russian Sense Bank, one of the country's leading commercial banks, and introduce temporary administration on Friday. The news was reported by The Gaze.

On Thursday, the National Bank of Ukraine revealed that it had taken the decision to "withdraw the systemically important" bank from the market and proposed the government's participation in the process. "The main objective is to protect the interests of depositors and creditors of the bank and maintain financial stability in Ukraine," stated Andriy Pysnyy, the head of the National Bank of Ukraine, during a press briefing.

Formerly known as Alfa-Bank Ukraine, Sense Bank is the 10th largest bank in Ukraine in terms of assets and is listed among the systemically important banks, according to the National Bank's data.

Pysnyy added, "Due to their connections with the aggressor, Fridman and Aven, they have faced sanctions such as asset freezing by the European Union and several other countries, including Ukraine, and cannot dispose of their assets. Meanwhile, the bank's owners have taken actions that may indicate an attempt to evade the applied sanctions."

The National Bank's recognition of their questionable business reputation and the ban on exercising voting rights in the bank's capital shares was a result of the owners' actions and inactions, making them unable to support the bank properly.

As a part of the economic response to Moscow's large-scale invasion on February 24, 2022, Kyiv imposed sanctions against Russia and initiated court cases to confiscate Russian state assets in Ukraine and assets of individuals closely associated with the Kremlin's leadership.

In June, President Volodymyr Zelensky signed a law enabling the government to nationalize banks owned by individuals affected by the sanctions due to Russia's invasion.

The National Bank of Ukraine stated that the owners' connections with Russia "pose significant reputational risks and have a considerable negative impact on the bank's operations."

Pysnyy mentioned, "Sense Bank's regulatory capital has fallen by 50% from March 1, 2022, to July 1, 2023, while in other systemically important banks, it has increased by approximately 29%."

Russian-Israeli businessman of Ukrainian origin, Mikhail Fridman, owns 32.86% of ABH Holdings SA, the majority shareholder of Sense Bank, and Russian tycoon Petr Aven owns 12.4% of the bank, as reported on the bank's website. Attempts to reach Fridman and Aven for comments were unsuccessful.

Sense Bank, with three million depositors, recorded losses amounting to 7 billion hryvnias (approximately $189.75 million) in 2022.

The Ukrainian financial sector and its banking system have demonstrated exceptional resilience during almost 17 months of war, thanks to the policies of the central bank, government, and substantial financial support from Western partners.

Central bank representatives have stated that they discussed their plans for the bank's nationalization with the International Monetary Fund, a key creditor of the country.

Officials said that the government's decision is expected on Friday, and all steps for the bank's nationalization should be completed over the weekend.

Fridman and Aven have been long-time partners in oil, banking, and retail businesses, and they have faced Western sanctions due to their likely ties with the Kremlin after Russia's invasion of Ukraine.