The National Bank of Ukraine has a new governor.
Kyrylo Shevchenko, 47, the head of state-owned Ukrgasbank, has been confirmed by a majority of the Verkhovna Rada, Ukraine’s parliament, shortly before noon on July 16.
He will replace Yakiv Smolii, the former governor, who resigned at the start of the month, saying he was pressured to leave. Smolii’s resignation shook the confidence of investors and international financial institutions and raised concerns about the regulator’s future. The country’s macroeconomic stability depends on an independent NBU.
All eyes are now on Shevchenko to see if he will maintain independence, continue Ukraine’s successful monetary policy and preserve the supervisory board.
Speaking in front of the Rada, Shevchenko said he “supports the NBU’s policy aimed at ensuring the macrofinancial stability of the banking system.”
“Inflation-targeting has demonstrated its effectiveness,” he said.
But he wants to see the NBU support more economic development by letting the real sector of the economy have easier credit.
To many in the banking sector, Shevchenko is an unknown quantity, a reason to be cautious. To many politicians who voted for him, he is a good compromise candidate.
Reached on Facebook, Shevchenko asked the Kyiv Post to speak to his spokeswoman at Ukrgasbank who had no immediate comment.
Rumors about Shevchenko’s candidacy have swirled for months. As soon as Smolii resigned, Shevchenko’s name came up. The President’s Office also said it considered other candidates.
Two weeks later, his nomination moved with lightning speed. President Volodymyr Zelensky registered the proposal bill late in the evening on July 15.
The following morning, parliament’s finance committee voted 22 to five in his favor with one abstention after a 45-minute confirmation hearing.
Parliament confirmed him less than two hours later, with 332 votes. The majority of 226 votes was cast by the ruling 248-strong Servant of the People party. The 44-member Opposition Platform — For Life cast 40 votes in favor; the 24-member Batkivshchyna cast 21 votes; and the 20-member Dovira faction cast 17. Unaligned lawmakers added 13 more supporting votes. The majority of delegates from the 20-member Voice and the 25-member European Solidarity factions abstained.
Mixed feelings
Many experts see Shevchenko as one of the best state banking executives. Ukrgasbank is one of the top Ukrainian banks, both by assets and performance. But he does not have much policy experience.
Many local and foreign analysts say that there is not enough information about Shevchenko.
Anders Aslund, a senior fellow at the Atlantic Council, said Zelensky wanted someone to control and that Shevchenko is a “sweet” but “dependent” person, who fits the bill. Serhiy Fursa, Dragon Capital’s fixed income head, echoed this belief, saying that the point in driving out Smolii is to have someone more pliable.
“From what we hear, he will not be as independent in making decisions as, for example, Yakiv Smolii,” said Yaroslav Zheleznyak, the deputy head of the finance committee and a Voice party lawmaker who abstained from the committee’s vote on July 16. Zheleznyak criticized the procedure, saying Zelensky gave lawmakers very little time to check Shevchenko’s credentials.
Timothy Ash of Bluebay Asset Management wrote that few people he’s spoken to in Kyiv know what Shevchenko stands for. The message, he said, is that “it could have been worse but let’s see where he stands on the key issues.” Ash suggested giving Shevchenko the benefit of the doubt and wished him luck.
Officials were more optimistic. Tymofiy Mylovanov, the former economy minister, wrote that Shevchenko was the best choice. Finance committee chair Danylo Hetmantsev also praised him.
Political scientist Volodymyr Fesenko said that Shevchenko is a good compromise candidate, which explains his abundance of votes.
International Monetary Fund resident representative in Ukraine Goesta Ljungman issued a measured statement: “We wish him success in steering the National Bank through this challenging economic environment. Effective implementation of the National Bank’s monetary, exchange rate and financial sector framework over the past few years has strengthened Ukraine’s economy. It is essential that the National Bank’s independence and high level of professionalism be maintained under the new governor.”
Two highly-placed banking sources, who spoke on condition of anonymity because they were not authorized to talk to the media, said that the President’s Office faced backlash from international financial institutions last week over Shevchenko’s possible candidacy.
On July 14, one day before Zelensky made it official, he had a talk with IMF managing director Kristalina Georgieva, who urged the president to preserve NBU independence and “stay the course.”
Fesenko said it’s likely that Zelensky settled the matter with the IMF before going ahead.
Policy and independence
Zelensky has come out in favor of easier credit and a lower discount rate, while complaining about a strong hryvnia. Shevchenko, meanwhile, reportedly criticized monetary policy under Smolii as hawkish while praising the government’s efforts to make loans cheaper.
Many fear that the new NBU governor will be pressured into increasing the money supply.
Banker Volodymyr Lavrenchuk, who was one of the potential candidates, said that the person to replace Smolii would be ordered to print money, leading to dangerous consequences.
Shevchenko sought to tamp down concerns. At his confirmation hearings, he said that he “wouldn’t allow uncontrolled inflation or uncontrolled (money) issuance” and that “the NBU should continue to cooperate with international financial organizations, especially with institutional creditors like the IMF.”
He said that the NBU would continue its current course under his leadership. But he thinks lending conditions should be improved.
“One of the drivers of credit portfolio growth is consumer lending, which does not create a positive effect for the economy and the population,” he said. “The emphasis should be shifted to lending to the real sector of the economy.”
Shevchenko added that the NBU should support state-owned banks’ development and fill the economy with credit resources. Finally, he said that exchange rate stability will be his priority.
Bluebay’s Ash said that Shevchenko’s support is likely tied to anti-reformers in the Rada being desperate to displace acting governor Kateryna Rozhkova, widely disliked for her role in cleaning up the banking sector under former governor Valeria Gontareva.
Fesenko said that Voice and European Solidarity probably disapprove of Shevchenko because he is not part of Gontareva’s old team.
Oleksandr Dubinsky, a lawmaker linked to oligarch Ihor Kolomoisky, has strongly criticized Shevchenko. At the confirmation hearing, Dubinsky drilled him about whether he’ll hire people related to ex-President Petro Poroshenko. Shevchenko responded that political forces cannot manage the NBU.
Asked if he would fire Rozhkova and other board members, Shevchenko said that they would not be exempt from the recruitment policy.
Governor’s background
Shevchenko began his career in banking in 1994. He got his start at the Kharkiv branch of the Ukrainian Credit Bank, followed by Bank Aval. Later, he spent 11 years at Finance and Credit Bank, where he eventually became chairman of the board.
Starting in 2006, he chaired the State Mortgage Institution, created to reduce the cost of mortgage loans. Under his oversight, the agency issued its first government-backed bonds.
In 2009, he moved on to advise then-Prime Minister Yulia Tymoshenko. He also joined the Ukrgasbank supervisory board and also advised the chairman of state-owned Oschadbank.
In 2010, Shevchenko bought and chaired the small Terra Bank before selling it in 2012. Terra would eventually go bankrupt, along with 100 or so banks in the years 2014–2016.
Shevchenko became acting chairman of Ukrgasbank in 2014 and full-fledged chairman in 2015. Today, Ukrgasbank has come the closest to privatization out of the four state banks. In November, the International Financial Corporation approved a five-year, 30-million-euro loan, with an option to convert it into 20% equity share in the bank.
Zelensky had wanted Shevchenko in the position for a while. Zelensky knows Evgeniy Metzger, the chairman of Ukreximbank, who previously served as Shevchenko’s deputy at Ukrgasbank.
