Some regulators don’t bend over when bankers are unhappy

THE FINANCIAL crisis of 2008 generated much hatred against Western bankers who are regarded as villains who walked away with millions of dollars while millions of other people lost their homes.

The worst the bankers suffered was the embarrassment of televised appearances before angry US congressmen or the removal of honours bestowed by the British government.  The regulators on both sides of the Atlantic pretended there was nothing else they could do.

But in the topsy-turvy world of Eastern European banking the stakes are higher.  A case in point results from the nationalisation of the Ukrainian PrivatBank, the country’s biggest lender.

The bank was nationalised after regulators found a $5.5 billion hole in its balance sheet.  The former owner of the bank, Igor Kolomoisky, was not happy.  In 2016 he had been given a way out of having the bank nationalised by the then governor of the country’s central bank, Valeria Gontareva, who suggested that he inject assets into the bank in a phased recapitalisation.  He failed to comply and the government decided (following Western precedent) that the bank was too big to fail.  The central bank and the IMF are now trying to recover assets that they say were stolen by Kolomoisky.

As reported by the Financial Times’ European Editor, Ben Hall on 19 September, Ms. Gontareva may be paying the price for her efforts to clean up the Ukraine’s financial sector.  She is now a fellow at the London School of Economics.  So was it an accident that a car ploughed into her at a pedestrian crossing in Knightsbridge?  Possibly.

However, since the election of the Ukraine’s new president Volodymyr Zelensky, as Ben Hall wrote, a “campaign of intimidation against Ms. Gontareva has exploded.”  That includes online abuse, criminal proceedings for alleged abuse of office, and a demand that she return to the Ukraine for questioning.

When she did not return, police raided her flat in Kiev, a car belonging to her daughter-in-law was torched and last week Ms. Gontareva’s house outside Kiev was destroyed by fire.

Kolomoisky denies he has anything to do with Ms. Gontareva’s misfortunes.  But he is trying to cut a deal with the new president and his chief of staff, Andriy Bogdan, to regain his interest in the bank.  It was Kolomoisky’s television channel that helped promote the new president during his election campaign and Mr. Bogdan acted as Kolomoisky’s lawyer during the PrivatBank case.

The struggle over the bank has continued with prosecutors launching criminal proceedings against the current management.  Ms. Gontareva’s successors at the central bank condemned the attacks on her, but they fear that they may be the next targets.

What happens next may illustrate the difference between the subtlety of Western bankers, who rob their powerless clients with the help of diffident regulators, and Eastern European bankers who rob their country by attacking regulators who are making efforts to eliminate corruption.