(Bloomberg) -- Ukraine’s central bank put Sense Bank JSC under administration and requested its nationalization from foreign stakeholders controlled by a group of sanctioned Russian moguls including Mikhail Fridman and Petr Aven.

Sense Bank will fall under temporary administration on Friday, when the government will decide on the nationalization request, central bank Governor Andriy Pyshnyi told reporters Thursday in Kyiv.

“There are enough grounds for the Cabinet to approve” the nationalization “to ensure financial stability and to protect the interests of depositors,” he said. The bank will be under the control of the State Deposit Guarantee fund until the Finance Ministry takes over, which may happen as soon as Monday, Svitlana Rekrut, head of the fund, told the same news conference. 

Sense Bank was previously known as Alfa-Bank Ukraine and ranked among the nation’s 15 systemically important lenders. Following the Kremlin’s invasion of Ukraine, Fridman and Aven were sanctioned by the European Union and the UK, while Kyiv imposed asset freezes and ended business licenses last year.

‘Systemically Important’

“Sense bank is determined as a systemically important bank that’s critically important for the economy’s functioning,” the central bank said in the statement. Fridman’s and Aven’s links with Russia following the military invasion “cause significant reputation risk and have a significant negative impact on the bank’s activity.” 

Fridman and his partners have in recent months tried to gain permission to boost the lender’s equity by $1 billion, later saying they’d found a foreign buyer for the bank. Ukrainian authorities rejected the deal because the stakeholders were under sanctions.  

Sense Bank’s nominal owner, Luxembourg-registered ABH Holdings S.A., will dispute nationalization, including in international courts “in order to protect its investment and mitigate the losses,” the company said prior to the move. It fell under Ukrainian sanctions alongside other companies related to Fridman and Aven a few days before the lender’s takeover.

“The new law is discriminatory and violates international standards of fairness to investors,” ABHH said in a statement earlier this month. “The nationalization of JSC Sense Bank would result in losses for bondholders as well as the shareholders of ABHH.”

The central bank is already aware about the plan to challenge nationalization, according to Pyshnyi.

“The National Bank of Ukraine is ready for any developments,” he said. “The decision taken today is grounded and in accordance with all procedures and law.”

Pyshnyi expects the nationalization process to go “smoothly” and “the question of returning the bank to its former owners is excluded.” 

--With assistance from Daryna Krasnolutska and Aliaksandr Kudrytski.

(Updates with central bank governor starting in third paragraph.)

©2023 Bloomberg L.P.