Alliance Bank has failed for the third time to sell/place shares of an additional issue. On August 22, another deadline granted to the bank’s shareholders for the pre-emptive right to purchase new shares ended without result.
This indicates either the real state of the bank’s financial affairs — in which even its own shareholders do not trust it — or that the additional share issue story is merely a staged tactic to prevent the National Bank from taking radical measures to remove the bank from the market. However, such a practice apparently does not raise any objections from the regulator, since there has been no reaction from the NBU. Domestic and foreign journalists have repeatedly and unsuccessfully asked NBU Governor Pyshnyi to comment on the situation with the financial institution.
Abuses at Alliance Bank
Abuses at Alliance Bank in the pre-war years repeatedly attracted the attention of the National Bank and law enforcement agencies. Among such abuses: servicing gambling companies with Russian ties, manipulations with government bonds (OVDP), non-payment on bank guarantees issued in favor of the Ministry of Defense.
Already during the full-scale war, Alliance Bank became a participant in a scheme that caused more than UAH 1 billion in damages to NEC “Ukrenergo”. This concerns a bank guarantee issued and not paid in favor of the state-owned company for UAH 1.85 billion. Despite the unconditional nature of such compensation, the bank has been suing the state for the third year.
The thing is that while positioning itself as a leader in the bank guarantee market and earning money on their mass issuance, Alliance Bank did not and does not have real resources to service them. For example, the UAH 1.85 billion guarantee issued in 2021 exceeded 25% of the bank’s asset value. As NABU’s investigation into the high-profile case of damages to Ukrenergo revealed, Alliance Bank’s management systematically falsified reporting and provided the National Bank with data understated by six times regarding this guarantee — which in itself should have been grounds for terminating the bank’s activities. An NBU inspection in January 2023 revealed not only these violations but also the bank’s non-compliance with other regulatory standards.
However, the National Bank decided to save the bank: in 2022 alone, it issued almost UAH 2.5 billion in refinancing loans to Alliance Bank. Apparently, one of the conditions for allowing the bank to continue operating was the management’s commitment to increase the authorized capital. Alliance Bank first announced its intention to increase the authorized capital by UAH 247 million through a share issue in the summer of 2023. At the same time, the media loudly reported that the Antimonopoly Committee had granted permission to the Chairman of the Supervisory Board and de facto beneficial owner Pavlo Shcherban to acquire a package from the additional issue, which would give him more than 25% of the bank’s shares.
Since then, according to Alliance Bank’s reporting, similar decisions on additional share issues have been made three more times. However, none of the extensions or prolongations of the sale terms for the bank’s existing 43 shareholders have produced any results. Even the replacement of the Chairman of the Board did not help. Frolova, who is accused and internationally wanted in the NABU case for causing UAH 716 million in damages to the state, was removed by the shareholders in May 2024. However, even the acting Chairman of the Board status, in which her successor has been for more than three months, apparently does not inspire confidence among shareholders in the financial institution’s future. In any case, shareholders have shown no desire to invest their own money in the bank.
Pavlo Shcherban is also in no hurry to become the owner of 25% of the bank’s shares. According to media reports, over the past year alone, the Chairman of the Supervisory Board of Alliance Bank has become the founder and sole beneficial owner of three companies with a declared total authorized capital of UAH 2.5 billion. Whether Pavlo Shcherban actually has confirmed sources of origin and intends to contribute these funds to the authorized capital of the newly created companies, or whether this is another scheme to legalize funds through accounts opened at Alliance Bank, is a question for the State Tax Service. In addition, at the end of the year, Pavlo Shcherban will likely leave his position due to the expiration of his term of office.
At the moment, it appears that the financial situation at Alliance Bank has reached a dead end. The matter is now up to the NBU and Mr. Pyshnyi. Perhaps the demonstrated insolvency of Alliance Bank will at least force the NBU leadership to publicly explain its reasons for such loyalty to this financial institution.
