Ukraine nationalizes its largest bank to prevent financial meltdown

KIEV, Ukraine, Dec. 18 (UPI) -- Leaders in Ukraine decided to nationalize the largest bank in the country to prevent a meltdown there as part of an International Monetary Fund effort to fix the banking system there.

The government of Ukraine took over PrivatBank Sunday, an idea proposed by the bank as it has tried to get itself back on the right path, moving to recapitalize the institution and protect depositors while it is rehabilitated.

Ukraine has put great effort into fixing its banking industry during the last two years as it has relied on funding from the International Monetary Fund -- recapitalizing Privatbank and others is part of the agency's $17.5 billion bank bailout program.

Despite what the horror such a move may look to many investors, experts told The Wall Street Journal they think taking the bank takeover is "a positive move with a likely painful initial shock."

Privatbank holds about one-third of all deposits in Ukraine, though the government says it requires several billion dollars in funding to back up savings, which the band does not have.

"These actions are taking place in strict coordination with international financial institutions and with their support," goverment officials said, adding that its actions would "save PrivatBank and the entire bank sector."