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The National Bank of Ukraine has decided to classify Megabank as insolvent for failing to comply with the law.
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On 3 February 2022, the lender was classified as problematic by the board of Ukraine’s central bank.
The NBU said Megabank violated regulations of the central bank in terms of credit risk assessment.
Other violations by the lender include lending to related parties and a significant build-up of non-core assets on the balance sheet.
Furthermore, the bank failed to implement the restructuring plan, which was based on the results of stress tests conducted in 2021.
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By GlobalData“This is the first time a bank was classified as insolvent during the war,” Viktor Subotin, the majority shareholder of Megabank said.
However, the NBU stressed that issues at Megabank were not caused because of the imposition of martial law. They began long before the Russian invasion of Ukraine.
With UAH11.193bn in assets, Megabank ranked 24th among 69 banks operating in Ukraine as of 1 March 2022.
Declaring Megabank insolvent will not impact the banking sector in Ukraine, which is stable and solvent, the banking regulator said.
Subotin has urged the parliamentarians of Ukraine to assess the actions of NBU and its decision to classify Megabank as insolvent.
Based on the NBU’s data, as of 20 May 2021, Subotin held a 70.56% direct and indirect stake in the insolvent bank.
The European Bank for Reconstruction and Development (EBRD) and German Development Bank KfW each owned an 11.3% stake in Megabank.
Other shareholders such as Olena Subotina owned 8.2% and the International Finance Corporation (IFC) had a 4.5% stake in the bank.
