The decisions of the former management of the long-liquidated Platinum Bank to issue foreign currency loans caused damage to the state. How to compensate it and what consequences will it have?
Ekaterina Rozhkova is a real long-liver of the National Bank. During her eight years as a member of the board, she managed to “outlast” three NBU chairmen and all their deputies and made many enemies among the former owners of banks withdrawn from the market. The most famous of them is Igor Kolomoisky, for whom Rozhkova became “Carthage that must be destroyed.”
However, it turned out that the most serious challenge in her career at the central bank was not the odious oligarch, but her own past. On March 18, the Supreme Court put an end to the dispute between the Deposit Guarantee Fund (DGF) and the former management of the bankrupt Platinum Bank. Among the ten defendants is Rozhkova, who worked on its board before moving to the NBU.
According to the court decision, the defendants must compensate the state for UAH 1.5 billion in losses incurred by Platinum Bank due to the issuance of loans in 2013-2014. This decision has already begun to be implemented, although so far only by writing off the funds of the first deputy head of the National Bank.
What decisions of ten years ago “caught up” with Rozhkova? How can a court verdict affect her career at the NBU and the banking system?
What's the matter
In August 2020, the Deposit Guarantee Fund filed a lawsuit in the Economic Court of Kyiv against the former top managers of Platinum Bank. The Federal Guarantee Fund demanded that the latter compensate the damage caused to the bank in the amount of UAH 1.47 billion.
Interestingly, the fund filed the lawsuit more than three years after Platinum Bank was sent for liquidation. By doing this, he violated the statute of limitations, but the quarantine that the government announced due to the pandemic helped. Therefore, the statute of limitations was automatically extended.
FGVFL lost the first instance, but did not stop fighting, appealing to the Northern Economic Court of Appeal. On June 12, 2023, the fund won the appeal, and on March 18, 2024, the Economic Court of Cassation as part of the Supreme Court left this decision unchanged.
The defendants in the case are ten former top managers of Platinum Bank: Chairman of the Supervisory Board Grigory Gurtovoy (at the time of issuing the loans he was the owner of the bank), board members Konstantin Smolsky, Sergey Popov, Leonid Rybin, Vadim Krivovyaz, Vladimir Konik, Ekaterina Ladyzhenskaya and Ekaterina Rozhkova, as well as members of the credit committee Konstantin Gorbeshko and Dmitry Krasnoshlyk.
The Court of Appeal ordered them to compensate for the damage caused to the bank by their actions or inactions. All defendants bear joint liability, that is, the Fund may demand repayment of the entire amount from all debtors or from one of them, and he will have the right to demand compensation from the remaining defendants.
What's the point
The events to which the case relates unfolded at Platinum Bank at the end of 2013. Then Grigory Gurtovoy, an Odessa businessman with Russian and Israeli citizenship, became its owner.
He headed the bank's supervisory board on November 20, 2013. The next day, Rozhkova, who had previously worked on the board of the Finbank of Alexander Granovsky, business partner of Boris Kaufman, was appointed a member of the bank’s board. In October 2016, the NBU recognized Kaufman as the owner of a significant participation in Platinum Bank.
A month later, the bank began issuing foreign currency loans: December 23 - $12 million Stratagema-Invest LLC, $15 million Logistic Trans Private Enterprise, $12 million Real Invest FC, $12 million Titan-Invest LLC south"; December 27 – $3 million Titan-Yug LLC; February 5, 2014 – $15 million each to Osher LLC and Kodos Invest LLC.
Subsequently, it turns out that management made synchronous decisions regarding these loans. In particular, regarding the postponement of the date of return of interest, the extension of the deadline for the return of interest, and the partial change of currency - from dollars to hryvnia.
At the beginning of 2015, the bank decided to change the collateral for these loans. The borrowers' property rights were replaced with securities of the companies: PJSC CB Transporter, PJSC Insurance Company Standard RE, PJSC Global Transport Logistics and PJSC Khimmet. Subsequently, the court will agree with the position of the Deposit Guaranty Fund that these securities were “junk”, because their real value is “0 hryvnia”.
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These decisions were made at a time when Rozhkova was a member of the board of Platinum Bank, and partly when she began acting as chairman of the board (from May 30, 2014). On June 9, 2015, Rozhkova resigned from Platinum Bank, and the very next day she began working as director of the banking supervision department of the NBU.
A month after this, Platinum restructured the above loans on the same terms:
- issued new loans to borrowers to repay overdue interest on loans;
- reduced the rate on loan balances in dollars from 10% to 1% per annum, and on those converted into hryvnia - to 2% per annum (for comparison: in July 2015, the NBU discount rate was 30% per annum);
- For violation of deadlines for paying interest on restructured loans, borrowers were subject to a “fine” of 1 kopeck.
In the end, the bank attributed these loans worth UAH 1.47 billion to its loss. It was this amount that the court ordered the former top managers of Platinum Bank to compensate to the state.
What the NBU found
The National Bank declared Platinum Bank insolvent on January 10, 2017 and sent it for liquidation on February 23. However, the regulator knew about the problems with the bank’s loan portfolio long before this.
The court found that in February 2015, the NBU conducted a scheduled inspection of Platinum Bank. As a result, the regulator discovered a number of such violations.
1. Significant concentrations of loans. The debt of the largest borrower, Osher LLC, amounted to 44% of the first tier capital. The NBU discovered many borrowers whose main source of income was payments from the same company.
2. A significant part of the bank’s loan portfolio is foreign currency loans. They were issued to borrowers who had no sources of foreign currency earnings.
3. Low quality of loan collateral. The collateral for 10.5% of the loan portfolio was “junk” securities of the companies KB Transporter and Khimmet.
Based on the results of the inspection, the NBU recommended, in particular, to take measures against the management of Platinum Bank, which violated the law. The bank had to inform the NBU banking supervision department about these measures.
Also in 2015, at the request of the NBU, the auditing company Kadastr-audit conducted an audit of Platinum Bank’s transactions with related parties. Among them are six borrowers whose loans were the subject of the FGVFO lawsuit.
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The regulator conducted another examination of the bank in 2016, when Rozhkova worked at the NBU. Based on the results of this diagnosis, a program for additional capitalization of the institution was approved, which was to be carried out before January 1, 2017. For the failure to implement this program, the NBU declared Platinum Bank insolvent.
Its informal owner, Kaufman, tried to keep the bank afloat. In 2016, he asked the National Bank to approve the acquisition of more than 75% of the shares of Platinum Bank, but the regulator refused. As stated in the press release on the bank's withdrawal from the market, the reason for the refusal was the failure to submit certain documents to the NBU, in particular permission from the Antimonopoly Committee.
What Rozhkova says
In her commentary, EP Rozhkova noted that the situation with the deterioration in the quality of Platinum Bank’s loan portfolio should be considered in conjunction with the situation that existed in the country ten years ago. In particular, with the sharp rise in the dollar exchange rate and the leakage of depositors’ funds from the banking system.
According to her, at the time of issuing the loans referred to in the court decision, the owner of the bank was Gurtovoy and the borrowers were not associated with him. They became like this after Platinum transferred assets and liabilities to Finbank in 2014.
In 2014-2015 depositors began to withdraw funds from banks. The same applied to Finbank depositors, who were then transferred to Platinum Bank. Due to this outflow of liquidity, the financial condition of Platinum Bank has deteriorated significantly.
“Since no one then understood how the situation on the foreign exchange market would develop, we did a lot of short-term restructuring for foreign currency borrowers: postponing interest payments and repaying debt. At that time, it was impossible to buy currency at all,” notes Rozhkova, explaining why the bank made so many concessions to clients against whom the Federal State Fund was sued.
According to her, such restructurings have borne certain fruits and the loans issued have begun to be partially repaid. Rozhkova added that after moving to work in the banking supervision department, and then to the board of the NBU, she did not take part in the preparation and adoption of decisions on Platinum due to a conflict of interest.
Consequences for the banking system
In addition to the consequences for Rozhkova and the former top managers of Platinum Bank, the court's decision may have much wider consequences for the banking system.
The Supreme Court confirmed that it can apply joint and several liability to the board of a bank and its supervisory board, so bank managers received additional reason to be careful when making decisions. And finding candidates for positions on bank supervisory boards may now become much more difficult.
The publication’s interlocutors at the NBU and the Federal Guarantee Fund say that the decision in the Platinum Bank case may become a precedent. It will influence the consideration of similar processes that the fund is conducting against bankrupt banks and their leaders. It will be easier for the state to collect funds from the ex-owners and former managers of bankrupt institutions.
What's next
Rozhkova is already financially responsible for the loans issued by Platinum Bank ten years ago. According to ED sources, she is the only one of the ten defendants whose funds were used to repay the debt. In this case, the fund received UAH 1.1 million in compensation.
Rozhkova’s annual declaration for 2023 indicates few liquid assets that can be recovered: 1.5 thousand dollars and 182 UAH in Platinum Bank; 8 thousand dollars and 15 thousand euros in cash, 2,670 dollars. on an account in Privatbank. She also declared an apartment in Kyiv with an area of 99.5 square meters. m, a garage, two plots of land in the Kyiv region, a garden house and a 2008 Honda CR-V.
It is unclear whether the court decision will affect Rozhkova’s tenure on the board of the National Bank. The regulator did not respond to the ED’s request on this matter by the time the publication was published. The ED's interlocutors at the National Bank noted that they are still awaiting the full text of the court decision and the lawyers' conclusions.
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In the Law “On the National Bank”, among the grounds for dismissal of a board member, there is no mention of a court decision in economic proceedings.
However, clause 13, part 5, art. 10 (establishes requirements for members of the council and board of the NBU) indicates that the basis for dismissal may be “enforcement of a court decision on the payment of taxes, fees or other obligatory payments, if the total amount of non-payment is equal to or exceeds 100 times the minimum wage.” It is unclear whether this point can be applied to Rozhkova.
Paradoxically, it is the Deposit Guaranty Fund and the state that are most interested in Rozhkova continuing to work at the National Bank. The fact is that after the restructuring of the fund’s debt to the Ministry of Finance, all funds collected from the former owners and top officials of bankrupt banks are sent to the state budget.
According to the annual declaration, Rozhkova’s salary at the NBU for 2023 amounted to UAH 5.9 million. If state executors do not find other sources to cover the debt and collect everything they earn from her, she will have to pay for 250 years.
