Ukraine Taps Replacement for Central Bank Chief Accused of Graft

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(Bloomberg) -- Ukraine tapped a former bank chief to replace central bank Governor Kyrylo Shevchenko, who said anti-graft authorities had accused him in an embezzlement case after he unexpectedly resigned this week.

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President Volodymyr Zelenskiy nominated pn Thursday Andriy Pyshnyi, formerly the chief executive of government-controlled lender Oschadbank and a politician, to take over from Shevchenko.

Earlier, the anti-corruption bureau said it sent a notice of suspicion in an embezzlement case to an unnamed senior official involved in an alleged scheme to siphon 206 million hryvnia ($5.6 million) from a state-run lender. Shevchenko, who resigned Tuesday citing health reasons, acknowledged the accusations and denied wrongdoing, calling the investigation politically motivated.

“As I announced my resignation, I was fully aware of my responsibility for Ukraine’s financial stability and reputation, and so I decided to cite only one reason for resigning my post - my deteriorating health,” Shevchenko wrote on Facebook, adding that he was abroad for medical treatment. “I decided not to talk about the almost two years of political pressure, which had intensified on the eve of my resignation, and seriously aggravated my health problems.”

The shakeup comes as Ukraine struggles to tackle inflation. It’s also seeking a new long-term deal with the International Monetary Fund as the estimated costs of rebuilding from the war climbs to the hundreds of billions of dollars.

Pyshnyi will meet lawmakers Thursday to present his program, Danylo Hetmantsev, the head of the parliamentary financial committee, said by phone.

If confirmed by the assembly, as expected, Pyshnyi will take over an institution with a tortured history of governors complaining of intense pressure from politicians bent on swaying the bank’s policy.

Shevchenko’s predecessor, Yakiv Smoliy, unexpectedly quit in mid-2020, citing political pressure to lower interest rates.

Before that, then-Governor Valeriya Gontareva fled the country after being hounded by protester, and alleging that one of her opponents burned down her family home. She also received a coffin containing a cutout of her wearing a prison inmate’s uniform delivered to the central bank.

Investigators said, that while serving as the chief executive of state-owned Ukrgazbank, Shevchenko and his two deputies channeled money out of the lender via payments for services to “pseudo intermediaries” who brought in big clients’ deposits.

The services existed only “on paper,” as clients put money into the bank on their own initiative or according to rules set up by the government for state companies, the investigators said, citing evidence based on witnesses, electronic records and information from clients.

Shevchenko said he had been surprised by the notice and that all of Ukrgazbank’s transactions were checked by audit companies. The bank also underwent controls as a state lender, he said.

“All those checks did not show any wrongdoing,” he said.

Political Pressure

With Zelenskiy’s government continuing to put pressure on the central bank to stretch its capacity to finance the war-battered budget, it’s not clear how Pyshnyi, a 47-year-old ally of the president’s chief of staff Andriy Yermak, will react.

“This is the main problem and threat,”said Dmytro Boyarchuk, executive director of the economic-research company Case Ukraine in Kyiv.

After serving on Oschadbank’s board in the early 2000s, Pyshnyi began his political career when President Viktor Yushchenko appointed him deputy head of the National Security and Defense Council.

He and his allies later joined forces with the political party that became the driving force of the so-called “Revolution of Dignity” that ousted pro-Russian President Viktor Yanukovych in 2014. He resumed his banking career soon after, serving as Oschadbank’s chief executive officer until 2020.

While Pyshnyi is a political and business veteran, he doesn’t have universal support among economists, some of whom said a candidate with more of a technical background would be a better fit.

“The main monetary body should be governed by an economist, who understands macroeconomic processes, not by a business person like banker,” Boyarchuk said.

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