July 24, 2017 / 10:08 AM / 2 years ago

Ukraine central bank wants to widen ban on local PwC unit

KIEV, July 24 (Reuters) - Ukraine’s central bank is to ask the Auditing Chamber of Ukraine to delist the local unit of PwC, a move that would effectively strip the global accounting firm of the ability to audit companies in the country.

The move on Monday comes days after the central bank withdrew PVC’s right to audit Ukrainian banks, as punishment for what the central bank says was PwC’s failure to flag risky lending practices at the country’s largest lender, PrivatBank.

PwC audited PrivatBank, which Ukraine took over in December after finding a capital shortfall of more than $5.5 billion.

The local unit of PwC declined to make any immediate comment. Last week PwC said it would try to reverse the decision to ban it from auditing banks, which it said was unjustified.

The central bank said in a statement on Monday that PwC had signed off on “unreliable information about the financial and economic activities of PJSC CB PrivatBank, in particular, the amount of credit risk and regulatory capital”.

It said asking the Auditing Chamber to remove PwC from its registry was a logical next step following last week’s ban.

PrivatBank’s nationalization was the culmination of a swingeing clean-up of Ukraine’s financial system, backed by the International Monetary Fund. Dozens of lenders have closed since a pro-Western government took office in 2014.

The central bank estimated that 97 percent of PrivatBank’s corporate loans had gone to companies linked to its shareholders, who include the tycoon Ihor Kolomoisky, Ukraine’s second-richest man according to Forbes magazine.

Ukraine earlier in July started legal action to recover the loans made by PrivatBank, while Ukraine’s National Anti-Corruption Bureau has also launched a probe.

PrivatBank’s nationalization has so far cost taxpayers $4.3 billion, but an Ernst and Young audit of the lender’s 2016 annual report showed additional funds worth $1.5 billion were needed to meet capital adequacy requirements.

That would be a further burden on Ukraine’s already strained public finances and would mean more has been spent on recapitalizing PrivatBank since December than the annual defence budget amid a long-running conflict with Russia-backed rebels. (Writing by Matthias Williams; editing by Patrick Graham)

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