Verkhovna Rada fails to force resignation of NBU chairman (05/16/99)

Verkhovna Rada fails to force resignation of NBU chairman

by Roman Woronowycz
Kyiv Press Bureau

KYIV - The National Bank of Ukraine withstood renewed efforts by Ukraine's leftist-led Verkhovna Rada on May 6-7 to charge it with financial misdealings in the handling of Ukraine's currency reserves and attempt to force the resignation of its chairman.

A Verkhovna Rada special investigative commission released findings on May 5 that accused the central bank of inappropriate investment practices and called for the removal of Chairman Viktor Yuschenko, but the Parliament failed to approve all three resolutions that were put forward a day later. Two of the resolutions called for the resignation of Mr. Yuschenko. The third, a condemnation of NBU activities and a directive that its employees come under government control, also fell short of a majority.

On May 7 another attempt to condemn the NBU's activities also did not receive sufficient support from the national deputies to pass.

The special investigative commission, headed by Socialist Party member Viktor Suslov, who was President Leonid Kuchma's minister of finance until he ran for a Parliament seat under the Socialist banner in the March 1998 elections, was formed to look into the investment practices used by the National Bank of Ukraine in its handling of Ukraine's national currency reserve.

After the Verkhovna Rada's failure to force the resignation of the central bank chairman on May 6, Mr. Suslov told a press conference that he felt Mr. Yuschenko should still resign. "Even though no charges have been filed against him, he bears moral and political responsibility. If I were in Mr. Yuschenko's shoes I would resign," said Mr. Suslov, who has been named often as the leftists' choice to run the NBU.

Communists and Socialists in the Verkhovna Rada have tried to use the National Bank of Ukraine as a political tool against President Kuchma on more than one occasion, most recently in October 1998 when leftist national deputies tried to pin the blame on Mr. Yuschenko for the financial crisis that hit Ukraine earlier that summer.

The NBU has had to answer also to critics who feel that its banking practices are not sufficiently transparent and that it wields too much independence. The special commission that Mr. Suslov heads was formed after the October parliamentary debate.

In its report Mr. Suslov's investigative committee accused the NBU of a questionable deposit of $580 million into a Cypriot Bank, Credit Suisse-First Boston Ltd., between May 12, 1997, and January 28, 1998. It states that $85 million of that money has not yet been returned.

Cyprus is notorious for its liberal banking laws that are used by crime families to shelter and launder shady money. The commission report states that "the Credit Suisse-First Boston Ltd. bank is not on the list of first-class banking institutions."

The report also cited the NBU for "pumping Ukrainian currency into the Moscow-based National Reserve Bank" and for prematurely exchanging government external loan bonds that were not due to mature until 2002-2005 for government domestic loan bonds.

Furthermore, it accused the bank of making poor quality loans, specifically a $15 million loan to the Kharkiv-based Real-Bank, which was made using the Cypriot bank as an intermediary. The loan, which was to be used for the privatization of an enterprise, still has not been repaid, according to the commission's report.

Mr. Yuschenko responded to the accusations and allegations by stating that "there are no alleged losses."

"The National Bank is cynically accused of something that it cannot be accused of," said the bank chairman, emphasizing that independent audits support his assertions.

During the Verkhovna Rada session, which was held behind closed doors, the NBU defended its practices and even showed a profit of $100 million from its investment policy with Credit Suisse-First Boston. It also accounted for the $85 million that the investigative committee said is missing, money due to be repaid on October 8, 1999.

In defending the quality of the Credit Suisse-First Boston Bank in Cyprus, NBU officials presented paperwork that had been received by Verkhovna Rada Chairman Oleksander Tkachenko on October 30, 1998, showing that the bank has assets of $8.7 billion and carries a AA rating.

National Deputy Viktor Pynzenyk, head of the Reforms and Order Party and a well-respected economist, defended Mr. Yuschenko's actions and said he saw no substance to the allegations. "I see no grounds for talk of a loss of currency reserves," said Mr. Pynzenyk.

Others in the Verkhovna Rada, including presidential candidate and leader of the Socialist Party Oleksander Moroz suggested that the president will not allow full disclosure of the scale of the alleged "blatant abuses" of the NBU because it is not in his political interest at the moment.

"The president and his people wish to receive political dividends from this absolutely obvious situation," said Mr. Moroz, adding the nebulous note: "On the eve of presidential elections, it is known who has brought this to the attention of the State Security Service."

A report by the Security Service of Ukraine issued in early October 1998 had criticized the NBU investment in the Credit Suisse-First Boston Bank in Cyprus and questioned NBU investment procedures. That report spurred the Social Democratic (United) faction to propose the investigative committee that looked into the NBU's investment policies and actions.

Mr. Moroz said that President Kuchma will not allow the resignation of his chief banker because Mr. Yuschenko's popularity among economic reformers could make him a serious presidential candidate and a major threat to the president's re-election bid.

Several parties, including Mr. Pynzenyk's Reforms and Order Party, had tried to convince Mr. Yuschenko to run, but he has declined repeatedly and stated that for now his goal is to guide Ukraine onto a healthy monetary course.

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