Most central bank governors do not expect to be threatened with physical violence in their office. But most central bank governors do not work in Ukraine.
Valeria Gontareva has closed 87 ailing banks since President Petro Poroshenko asked her to chair the National Bank of Ukraine four months after Kiev’s pro-democracy revolution of 2014 began — as well as nationalising the country’s biggest lender, PrivatBank, late last year. There has been “absolutely incredible pressure” from vested interests she confronted, Ms Gontareva says.
“I can call it sustained harassment,” she says. “There was absolutely tons of fake information, manipulation, real absolutely evil slander about me personally, about the national bank team.”
More than once, she feared for her safety. “One big oligarch personally threatened me — physically threatened me — even in this office,” says Ms Gontareva, gesturing around the high-ceilinged meeting room in the gothic palazzo-style central bank.
Asked to name him, she politely shakes her head. But in two years and nine months, the 52-year-old former investment banker has notched up extraordinary achievements. She is judged by partners such as the International Monetary Fund to have cleaned up one of Europe’s most corrupt and precarious banking sectors. She has helped to stabilise the national currency, the hryvnia, under intense pressure, and achieve macroeconomic stability in a country whose foreign currency reserves were desperately low when she took over.
Ms Gontareva has negotiated and carried out reforms with the IMF that were vital to unlock a $17.5bn support programme. And she has shrunk her own institution from 12,000 to 5,000 staff.
She has done all this, moreover, while Ukraine’s economy was imploding after Russia annexed Crimea and fomented a separatist war in the country’s eastern regions. Ms Gontareva can add a new chapter, she jokes, to financial textbooks: “What to do with a country in war [when you can’t] pretend any more that it’s a business-as-usual model.”
Ms Gontareva is seen as one of the leading reformers in Ukraine’s drive to shift from a post-Soviet to a more transparent, European style of governance. All this, despite having no previous central bank experience.
Born in the industrial city of Dnipropetrovsk, she completed engineering and economics degrees. But after working as a design engineer, Ms Gontareva went into finance, ending up in senior roles with ING and Société Générale in Ukraine. For seven years, she headed Investment Capital Ukraine, a Kiev investment bank whose clients included Mr Poroshenko and his business empire, and where she apparently gained the future president’s trust.
She was tested early in the central bank role. As fighting peaked in Ukraine’s eastern war in September 2014, and again the following February, sharply hitting industrial production, the hryvnia came under pressure. The bank was forced to take what Ms Gontareva calls “absolutely incredible, draconian, administrative measures” — imposing tight exchange controls.
Some criticised the measures as excessive. But the central bank chief says it was only thanks to these tough actions that the currency stabilised.
The banking sector clean-up has taken longer, though Ms Gontareva says her commercial banking background helped her to understand quickly the scale of the problem.
The 87 banks liquidated — out of 180 banks when she started — fell into three categories. Twenty were pure “money laundering machines” with “no assets or liabilities” used entirely to stash away ill-gotten gains, usually abroad. A second group was “zombie banks” which had “only liabilities and no assets”.
Third were the “oligarch banks” — belonging to the tycoons who, even after Ukraine’s post-revolutionary reforms, still dominate business, politics and the media. These banks, she says, “collected money from all possible sources — mostly from private individual deposits — and invested all this money into their own businesses”.
Ms Gontareva says such tycoons seemed to have no sense that these deposits were other people’s cash: “They truly believe that they’re among the top richest persons in this country [acting as if] that money belonged to them.”
Ukraine’s post-revolutionary economic slump, she says, exposed some oligarchic banks as “pyramid” schemes. The biggest was PrivatBank, which held a third of the country’s retail deposits, and was nationalised in December after the national bank found a $5.5bn hole in its accounts.
Little wonder, therefore, that Ms Gontareva has incurred oligarchs’ wrath. PrivatBank’s ex-owners, Igor Kolomoisky and Gennadiy Bogolyubov, she says have insisted their bank’s finances were not as bad as claimed, accusing Ms Gontareva of heading an asset-grab by the state. Another oligarch handed out leaflets at the IMF’s October meeting in Washington calling her a “threat to Ukraine’s economic stability”.
Her past links to Mr Poroshenko’s businesses and with a Russian bank saw Ms Gontareva’s name pop up in last year’s Panama Papers leaks.
She dismisses all this as “black PR” by opponents. It may also be little surprise that Ms Gontareva has recently signalled she may stand down after Ukraine receives its next instalment of aid from the IMF. She has told friends she is exhausted, but feels her mission is accomplished.
“I was not initially very eager to accept this position, but finally the president convinced me, and I really thought that it’s my challenge to do that — it was like a patriotic appeal.”
Any challenge is manageable, she says, “if you have your plan, if you have your team, if your team is dedicated, and you are a leader and know what should be done because you already prepared a detailed action plan. And if you have no doubts.”