Bank "Vostok" of Volodymyr Kostelman benefits from the generosity of the fugitive head of the NBU, Kyrylo Shevchenko

While Kyrylo Shevchenko enjoys peace in the capital of Austria, and NABU pretends to actively search for him, Ukraine is dealing with the consequences of the former head of the National Bank’s actions. This includes, in particular, billions issued as refinancing to suspicious banks.

Among other banks that received money from Shevchenko’s generous hands, many questions arise about Vostok Bank, to which the NBU issued one billion hryvnias in refinancing on the first day of the full-scale invasion, February 25. At 6.5% per annum, while others received money from the regulator at 7%. And after the NBU tripled the discount rate, the cost of refinancing money for banks rose to 27%.

However, Vostok Bank will not repay the received funds at such a rate. Why? It’s simple – the NBU applied an interest rate swap mechanism for it. How does it work? Quite simply – the bank has several swap contracts with the NBU for hedging interest rate risk on long-term refinancing. These agreements act as insurance – if market rates exceed the swap contract rates, the bank receives compensation from the NBU.

Considering the average swap contract rate of 7.6% per annum and the current market index UONIA value of 23%, Vostok Bank receives compensation from the NBU of 15.4% per annum. The real cost of refinancing for the bank, instead of 27%, is only 9.6% per annum. The bank attracted refinancing secured by government bonds, which continue to generate a yield of 12.2% for it. Thus, the “refinancing with government bonds” model provides the bank with a margin of 2.6% per annum.

Guess who will ultimately pay for Kyrylo Shevchenko’s generosity – take a wild guess. Because not all banks received money under such a system. For instance, SICH Bank, which went bankrupt a few months ago, had no such privileges. Why such a preference for Vostok Bank, which is openly called a “laundering” bank? This is a question for the fugitive head of the NBU, but he is far away.

As for Vostok Bank itself, according to its reports, at the end of November, the bank ranks 26th in terms of assets among 69 banks. The bank’s assets exceed its liabilities by only one and a half billion hryvnias, though this figure is quite formal – in conditions of war and the loss of territories where some of these assets are located, even the bank itself does not know the real picture.

Profit is also unimpressive – against nearly seventeen billion in debts, 128 million looks quite pitiful. Thus, the billion hryvnias in refinancing risks being lost.

Moreover, the bank’s owners raise significant questions. The main beneficiary of Vostok Bank is said to be Volodymyr Kostelman, the owner of Fozzy Group. He also owns the Silpo and Fora supermarket chains, Bila Romashka pharmacies, and several dozen other various legal entities in Ukraine.

It is worth recalling that after the annexation of Crimea in 2014, Silpo successfully re-registered its network there under Russian legislation and continued to operate just as successfully.

This, of course, did not stop Kyrylo Shevchenko from issuing a billion hryvnias in refinancing.

Nor did the consistent decline in Vostok Bank’s ratings, confirmed just before the issuance of the billion hryvnias, affect the decision to allocate refinancing:

Neither did the history of Vostok Bank’s relationship with the National Bank influence Kyrylo Shevchenko’s decision – in 2019, the regulator fined Vostok Bank 300,000 hryvnias for failing to properly analyze the financial operations of its clients. The bank also received a written warning for violating the procedure for submitting information, materials, and documents to the NBU upon request.

Additionally, in 2019, the Prosecutor General’s Office stated that between 2017 and 2019, Vostok Bank and Power Brok LLC conducted transactions worth over 1 billion hryvnias. The transactions were carried out through accounts of 116 fictitious individuals opened in banking institutions such as Accordbank, Zemelnyi Capital, Ukrbudinvestbank, and MetaBank, under the guise of accounts for providing and servicing consumer loans.

Subsequently, when the money reached the accounts of the involved parties, it disappeared irretrievably. "Funds were withdrawn in cash from the current accounts of individuals, and the loans were never repaid," investigators claimed at the time. However, as with most criminal cases in our country involving big business, this case ended with nothing but loud statements.

What will happen next with Vostok Bank remains an open question. Will it follow the path of SICH Bank, which also generously received refinancing from Kyrylo Shevchenko, or will it manage to repay the borrowed money – it is unknown. However, it is known that on September 20, 2022, Vostok Bank decided to invest 1.8 billion hryvnias in NBU deposit certificates at 23% per annum. This investment was made possible, in part, due to the preferential refinancing from the NBU.