Russian financial institutions still working in Ukraine – when will they finally leave?

The financial sector has long been one of the main targets of Russian economic expansion in Ukraine. Both state and private Russian financial and industrial groups – VTB, VEB, Sberbank, Alfa and others – tried to establish their subsidiaries here.

The plan to capture the market seemed to have succeeded. As of 2013, the share of Russians in the banking market reached 11%. But with the beginning of Russian aggression in the Crimea and Donbas, Russians began to withdraw from the market.

The large-scale war unleashed last year further accelerated this process.

“Russian capital, both state or private, has no place in Ukraine,” Chairman of the National Bank of Ukraine (NBU), Andriy Pyshnyy, told NV Business.

“The Board of the National Bank, as one team, will act in strict compliance with the law, public interests, the mandate of financial stability and the requirements of martial law. That’s it.”

Read also: When will Alfa-Bank Ukraine be nationalized, and how much could it be sold for later?

Who is this message for? NV investigated which Russian banking and non-banking institutions are still present in Ukraine and what is happening to them.

What was the share of Russian banks in Ukraine before the war?

As of Feb. 1, 2022, there were five banks in Ukraine whose ultimate owners were individuals with Russian citizenship or Russian state structures. These are MP Bank (100% owned by Sberbank of Russia), Prominvestbank (99.77% owned by the state development corporation VEB.RF), First Investment Bank (PIN Bank, 88.9% owned by Evgeniy Giner), Forward Bank (the final key participant of Rustam Tariko), Sens Bank (formerly Alfa-Bank, key owners – Andrey Kosogov, Mikhail Fridman and Petr Aven).

In terms of total assets, their combined share was 9.6%, as well as 6.5% in terms of the volume of clients’ funds, the NBU’s press service told NV Business.

MP Bank and Prominvestbank were the first to leave this list. The NBU decided to liquidate them on Feb. 25, on the second day after the start of the war. A total of UAH 17 billion ($464.8 million) were transferred to the state budget special fund from their accounts.

After that, the share of the remaining banks – Forward Bank, PIN Bank, Sens Bank – decreased to 3.7% in total assets, and 3.2% in terms of the volume of clients’ funds. Sens Bank has the largest market share (3.2%), and it is this bank that is designated by the NBU as systemically important.

In early 2023, Ukraine’s National Security and Defense Council (NSDC) transferred the shares of Prominvestbank and MP Bank to the state-owned National Investment Fund of Ukraine.

What enterprises borrowed from Russian banks before the war?

Before the war, Russian banks tried to lend primarily to state companies, such as Ukrzaliznytsia, Energoatom, as well as large industrial enterprises, says Mykhailo Zhernov, managing partner of the Millstone&Co international investment company. According to him, the Russian banks aimed at making the Ukrainian economy dependent on their loans, and gaining confidential information.

“A loan always means influence, and the bank knows about everything that happens in the enterprise and controls the financial flow,” he said.

In particular, it is known about the rights of claim under the loans of MP Bank to state-owned enterprises for UAH 5.8 billion ($158.6 million).

What is the share of Russians in the market of non-banking institutions?

During the martial law, the NBU prohibited Russian citizens who are owners of a significant stake in a non-banking financial institution from using the voting rights of the purchased shares and from participating in any way in the management of such a provider of financial services.

Read also: No reason to nationalize former Alfa-Bank, NBU says

“Therefore, Russian citizens are banned from participating in the management and using voting rights of their shares in financial institutions,” the NBU emphasized.

Who does this concern? The insurance companies Motor-Garant and AlfaStrakhovanie operate in the market of non-banking financial institutions, as well as one financial institution and two lessors: Paritet Finance, Alfa-Leasing Ukraine and Invest-Region. Russian citizens are the owners of significant shares in all companies.

Three companies from the list, namely AlfaStrakhovanie, Paritet Finance and Alfa-Leasing Ukraine, are owned by the already mentioned Andrey Kosogov, Mikhail Fridman and Petr Aven who were sanctioned in accordance with the NSDC’s decisions that were put into effect by presidential decrees.

“Russian citizens Fridman and Aven are also sanctioned in the European Union, the United Kingdom, Canada, Switzerland, Australia, and New Zealand,” the NBU added.

“The imposition of sanctions involves a number of financial restrictions, in particular the blocking of their assets and a ban on conducting transactions, as well as a ban on entry into the relevant jurisdictions.”

In connection with the presence of Russian citizens in the ownership structures of these financial institutions, the business reputation of these companies was recognized by the NBU as impeccable.

Accordingly, the companies faced a measure of influence in the form of a temporary suspension of licenses for the provision of financial services. The website of

AlfaStrakhovanie states that the suspension of the licenses entails the obligation to current customers to “continue fulfilling the obligations under the already concluded insurance contracts, which were purchased until Dec. 6, 2022.”

The NBU added it would consider measures of influence on the Invest-Region company in the near future.

What else is the NBU preparing for?

The NBU assured that the banks with Russian roots that are still present on the market are supervised by the regulator in accordance with the requirements of the law.

“Regarding the owners of a significant share of these banks (PIN Bank, Bank Forward, Sens Bank), measures of influence have been applied in the form of a temporary ban on voting rights, until the violation is eliminated, the prohibition of the use of voting rights by the owner of a substantial share in the bank,” the NBU said.

Read also: NEQSOL tells why they are not interested in buying Alfa-Bank in Ukraine

According to NV Business, the state is currently preparing for the nationalization of Sens Bank. The procedure will be carried out in accordance with the Law on Amendments to the Tax Code of Ukraine and some other laws of Ukraine regarding the peculiarities of withdrawing a systemically important bank from the market under martial law. Initially, the bank will be declared insolvent due to loss of liquidity and transferred to the Deposit Guarantee Fund.

The state, represented by the Ministry of Finance of Ukraine, will then be able to become the owner of the bank by buying its shares for UAH 1. Unlike the PrivatBank case, nationalization will take place without recapitalization. According to the law, the relevant bank will continue to operate as usual under its own business model, so the bank’s customers will not be affected by this process.

In peacetime, Forward Bank would have already been withdrawn from the market, and PIN Bank is gradually reducing its activities, said ICU financial analyst Mykhailo Demkiv. The NSDC also imposed sanctions on the key owners of both banks.

“Forward has negative capital,” Demkiv said.

“In peacetime, the Deposit Guarantee Fund would have already dealt with it. But during martial law, banks will not withdraw their capital. The situation will change if it (bank) loses liquidity.”

Demkiv noted that there are no problems with the implementation of regulations at PIN Bank, despite the reduction of operations.

Read the original article on The New Voice of Ukraine