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PrivatBank, Italian regulator offer differing versions of events on branch closure

said Oct. 5 thatit had decided to close its Italian branch by the end of the year, althoughItaly's central bank said the same day that it had ordered the Latvian lenderto shutter the unit by then.

the license of thePrivatBank subsidiary in early August after an assessment of its operationsrevealed "serious violations of anti-money laundering rules." ButPrivatBank Chairman Aleksandar Kukic told S&P Global Market Intelligence at the timethat, according to the head of the Italian unit, "nothing untoward"had happened at the branch.

Kukic,who joined PrivatBank a few days after the conclusion of the Banca D'Italiainspection, launched an internal investigation that he said could lead to anappeal given that the head of the branch, Cernishev Oleg Yurevich,"strenuously [denied]" the regulator's allegations.

However,PrivatBank's Oct. 5 statement made no mention of the central bank'sinvestigation or its allegations, with the lender instead suggesting that theclosure of its Italian branch was part of a strategic decision to focus on moreprofitable markets.

RobertChristian Schoepf, a PrivatBank board member and head of business strategy anddevelopment, said in the statement that the Italian unit had been an"experiment" by the previous board that "has not paid off due toincreased competition, different legal framework [and] the consequences of thefinancial crisis and changed regulatory requirements in the industry."Schoepf recently joined PrivatBank from Commerzbank AG, having worked for Deutsche Bank AG prior to that.  

Bycontrast, Banca D'Italia said it banned PrivatBank from carrying out anytransactions except to enable existing clients to withdraw their funds ortransfer them to other lenders.

AlsoOct. 5, PrivatBank said it appointed Sandijs Vectevs to its board withresponsibility for prevention of money laundering and compliance, as the lenderattempts to "reinforce the fight against money-laundering risk." Thatstatement made no reference to the Italian unit.

ASPrivatBank is 46.54%-owned by Ukraine's largest lender, , according to datafrom SNL Financial, an offering of S&P Global Market Intelligence.