"Failure to stabilize performance, prevent further capital erosion and ultimately return the bank to private ownership could undermine the recovery of the economy and risk further build-up of contingent liabilities for the sovereign," the release stated.
How Kiev handles the future of PrivatBank will be an important indicator of the government’s ability to restore confidence in the country’s financial system, Fitch explained, as Ukraine’s banking sector capitalization remains low and non-performing loans remain high despite economic improvements.
Kiev decided to nationalize PrivatBank after the National Bank of Ukraine declared it insolvent on Sunday.
Furthermore, she urged Ukraine to appoint an independent team to restore PrivatBank’s viability and work to get related loans repaid.
In March 2015, the IMF approved a four-year program of financial aid to Ukraine, which stipulates a $17.5-billion loan to be paid out in installments over the program period and originally open for review on a quarterly basis. The bailout package for Ukraine requires that Kiev implement a number of reforms.
