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To the President of Ukraine
Zelensky V.O.
To the Prime Minister of Ukraine
Shmigal D.A.
01001, Kyiv, street Olgynska, 3
01001, Kyiv, street Olgynska, 3
LLC "Budevolyutsiya"
01133, Kyiv, blvd. Lesya Ukrainka, 34, office 315/2


Estimate Volodymyr Oleksandrovych and Denys Anatoliyovych!

We express our sincere respect and call for your assistance in resolving the situation referred to in the appeal of the National Bank of Ukraine № 20-0006 / 22812 dated 12.05.2020.

As correctly stated in the appeal of the National Bank, the Bank "ARCADA" to date has been forced to stop the construction of three residential areas in Kyiv, in the construction of apartments in which more than 12 thousand of our citizens have invested. As a result, the developer has postponed the completion of almost 40 multi-storey residential buildings, growing social tensions among investors, which could escalate into mass riots and protests in the center of the capital, one of which has already been appointed by investors on 29.05.2020 in the government quarter.
Unfortunately, in its appeal, the National Bank refrains from disclosing the real reasons that led to this situation, and only confines it to describing the correspondence that the National Bank carried out with other public authorities, expressing concern about the situation.

At the same time, it should be emphasized that the construction of the Patriotyka, Patriotyka on the  Lakes  and Evryka residential complexes halt was not without the participation of the National Bank.

The most important factor that negatively affected the financing of construction is the restrictive measures applied by the National Bank to ARKADA Bank as the manager of construction financing funds.

The bank used a transparent and efficient model of financing housing construction, which consisted in the fact that the bank attracted deposits through which it issued loans to the population secured by mortgages, the funds of which were used for construction.

Thus, construction sites had a constant source of financing, investors had the opportunity to build affordable housing with long mortgage repayments, the bank had a loan portfolio with reliable and liquid data, and clients had deposits with high interest rates, which were always serviced by the bank, constant flow of income from loan repayment and interest on loans. This model of the bank's operation has been operating successfully for 25 years, both during the ups and downs of Ukraine's economy and during deep financial and economic crises. The bank has always fulfilled its existing obligations on time and has therefore been a model of stability among real estate investors.
At the beginning of 2019, a ban was introduced on the bank to attract new deposits. In addition to this restriction, the bank is also obliged to return deposits attracted by the bank to depositors in a short period of time. Under the influence of such a decision of the National Bank, any bank that is forced to return all deposits in a short time will not be able to remain financially stable.

The regulator's decision led to a significant reduction in construction financing, as the bank was no longer able to lend to real estate investors, and the proceeds from loan repayments were and are being used to meet obligations to the bank's depositors.

In another decision, the National Bank banned the bank from selling real estate to investors in new homes. This decision was catastrophic for the construction, which is carried out on a quarterly scale.

Everyone understands the fact that the sale of the first houses in the residential area finances the development of project documentation, construction of engineering and transport infrastructure, covers the costs of construction and more. Then, due to the sale of another group of houses, the construction of residential buildings begins, and only due to the sales of the last group of houses, the construction of all facilities is completed (including final improvement, construction of roads, networks, etc.).

That is, the logic used by the National Bank to "prohibit the sale of new homes until the completion of construction of existing buildings" is wrong and cannot be applied to construction carried out by neighborhoods, because the sale of apartments in a separate house does not finance the construction of this house. each apartment in each without exception of the house are the general receipts of CFF and are directed on the priority needs of financing of construction of a housing estate as a whole, instead of a separate concrete house. This is the essence of the ing of the construction financing fund, at the expense of which the construction of neighborhoods and neighborhoods is carried out!

Therefore, the ban of the National Bank on the sale of new houses in the residential complex "Patriotyka on the Lakes", which has with the residential complex "Patriotyka" joint electricity and heat supply networks and, accordingly, a joint fund to finance construction, stopped the bank's ability to continue financing residential areas. A similar situation is taking place in the Evryka residential complex, where the regulator's decision to ban the sale of houses in the last turn actually stopped the financing of the completion of the houses in the previous queues.

Another factor that coincided with the above is the actions of certain officials of the Kyiv City State Administration and deputies of the Kyiv City Council, who are deliberately obstructing the construction of the R/C Patriotyka on the Lakes and R/C Evryka. For example, during the court hearing on the legality of the building permit issued to the developer, representatives of the Kyiv City State Administration persistently objected and continue to object to the possibility of housing construction on land plots allocated by the Kyiv City Council to the developer for housing construction. Another example of obstacles to the developer by the Kyiv city authorities are the unfounded actions of the Kyiv City Council aimed at terminating the lease agreements of land plots on which construction is carried out.

It is about these circumstances that the National Bank points out in its appeal, noting the risk of losing the developer's permit to perform construction work, as well as the right to use land plots intended for development of urbanization area Osokorky-Central in Darnytskyi district of Kyiv. At the same time, the National Bank does not note that these risks are created and supported by the actions of certain officials of the Kyiv City State Administration and the cessation of these risks is entirely within the control of the Kyiv city authorities.
For its part, the bank opposes these actions in the legal field and protects the legality of construction and the right to land in court. Thus, to date, all building permits issued to the developer are valid (this can be verified in the open register of permits on the website of the State Agency for Construction of Ukraine), as well as lease agreements for the right to use construction land (as evidenced by current lease records) in the State Register of Rights).

Also, the National Bank's warning about the developer's bankruptcy is not true, as in fact the court is currently considering the issue of withdrawal of Contactbudservice LLC from this status. In this regard, it should be noted that the creditors of "Contactbudservice" are partner companies of the developer, who are not interested in terminating the debtor and have already confirmed in writing the agreement to provide the necessary funds to restore its solvency.
It is worth paying special attention to the thesis set out in the appeal of the National Bank about the significant amount of commission, which the bank allegedly received from the developer as a manager of construction financing funds. First of all, it should be emphasized that in different periods of cooperation between the bank and developers as independent private entities, there were different agreements on different interest rates of the bank as a manager depending on the actual amount of funding. The National Bank, as a state regulator endowed with very broad powers (from the possibility of applying a written warning to the bank to the right to remove the head of the bank from office in case the bank engages in risky activities), has never taken any measures against the JSCB ARCADA to encourage the bank to review the amount of commission from the developer. This is explained by the fact that in accordance with the provisions of the legislation, the terms of cooperation between the manager of the construction financing fund and the developer, including determination of the amount of the manager's remuneration is determined exclusively by agreement of the parties without any restrictions (Article 6 of the Civil Code of Ukraine provides for freedom of contract), so the National Bank's statement about the alleged compulsory "collection of remuneration by the bank" is incorrect, as is the assessment of significant remuneration ». The absence of any direct actions on the part of the National Bank in the direction of influencing the size of the bank's commission as a manager clearly indicates the absence of any violations or improper actions on the part of the bank in this area. Otherwise, it is necessary to state the inaction of the NBU as a regulator.
It is a matter of great concern that the National Bank, which is required by law to ensure the stability of the banking system, applies individual restrictions to the activities of an individual bank (mentioned at the beginning of this letter) which lead to significant adverse effects on the financial institution) this creates the impression of deep concern about this situation by sending numerous appeals to various authorities instead of constructively resolving the situation by providing temporary support, for which the bank applied in the manner prescribed by law.

In recent years, ARCADA Bank has been forced to operate under conditions of unprecedented pressure from the National Bank and its severe restrictions on the bank as a manager of construction financing funds. The main reason for the application of restrictive measures against ARCADA Bank is the National Bank of Ukraine's alleged acquisition by the bank of the status of a specialized trust management bank. The conclusion of the National Bank is based on the resolution of the NBU Board №92 of 18.09.2017 on amendments to the Instruction on regulation of banks of Ukraine, which artificially reduced the marginal ratio between the volume of trust management operations and total assets of the bank from 100% to 50%.

With the entry into force of Resolution №92, the bank complied with the requirements of the National Bank and did not exceed the threshold level of 50%, but was forced to review the volume of trust management operations. Restrictions applied by the National Bank to the activities of ARKADA Bank blocked the bank's financial revenues. ARCADA Bank has repeatedly informed the National Bank about the devastating consequences of the decisions made by the National Bank.
In order to protect the interests of investors (CFF trustees), JSCB ARKADA in its letters and petitions to the National Bank to cancel the suspension of certain types of transactions and lift restrictions on certain types of transactions demanded to lift restrictions and warn of catastrophic consequences of National Bank decisions for bank customers of CFF and the threat to the financial stability of JSCB "ARCADA". However, such appeals of ARCADA Bank to the National Bank did not have a positive result.

In view of the above, evaluating the overall actions of the National Bank, it seems that the state regulator is consistently taking steps to create conditions for the nationalization of JSCB "ARCADA". It should be noted that among the state-owned developers in Ukraine, there is only the Ukrainian State Construction Corporation (Ukrbud), which today has virtually ceased operations and left numerous unfinished projects, which in fact confirmed its inability to fulfill its obligations. Completion of the construction of these unfinished buildings is still not possible to start Kyivmiskbud, with which, as is well known, relevant agreements have been reached. Given the above, we believe that the path of nationalization of JSCB "ARCADA" will lead to the creation of additional unfinished and defrauded investors in the number of more than 12,000 families, as in the field of public administration there are no companies capable of completing the construction of facilities belonging to the alliance companies operating under the brand "ARCADA".
Summarizing the above, it should be noted that the bank "ARCADA" as the manager of the CFF "Patriotyka", "Patriotyka on the Lakes", "Evryka" in partnership with construction companies sees opportunities to restore and complete the construction of facilities invested by citizens, to achieve the following :
- The National Bank should unblock the possibility of selling apartments in the projected residential buildings in those areas where the developer has already incurred costs for the construction of engineering and transport infrastructure;
- the city must pay for the existing obligations, part of which is confirmed by a court decision that has entered into force, and return to the developer funds in the amount of UAH 560 million;
- Kyiv City Council should extend the term of land lease agreements for the Patriotyka on the Lakes  residential complex, in the maintenance and development of which the developer has already invested hundreds of millions of hryvnias and whose construction has a valid construction permit;
- The departments of the Kyiv City State Administration should stop the policy of double standards in relation to the developers of the Patriotyka, Patriotyka on the Lakes, Evryka R/C and provide an opportunity to carry out construction without artificial obstacles, as well as ensure timely acceptance of technically serviceable engineering network.

In addition, to overcome the negative impact of restrictive measures of the National Bank on the activities of JSCB "ARKADA" and to protect the interests of investors and resume construction financing, we ask for your assistance in obtaining repayable financial assistance by the National Bank refinancing or issuing a loan by the state bank funds of the National Bank.

According to Article 55 of the Law of Ukraine "On the National Bank of Ukraine" the main purpose of banking regulation and supervision - security and financial stability of the banking system, protection of the interests of depositors and creditors. Given that ARCADA Bank has been operating under strict restrictions in recent years and has almost stopped financing the construction of two large housing estates, there is a risk of unfinished nearly 40 residential buildings and the loss of housing for 12,000 families. These events will have irreversible consequences for society and will lead to large-scale social conflict. In such circumstances, ARKADA Bank takes all possible and necessary measures to avoid this situation and applies to the National Bank for financial support from the regulator. After all, today the National Bank declares the available opportunities for commercial banks to receive financial support from the National Bank. Having received a sufficient amount of credit funds, commercial banks are able to meet their obligations on time, which contributes to the stable operation of the banking system.

                        JSCB "ARCADA"                                                             K.V. Palyvoda

                       Chairman of the Board
                       JSC JSCB "ARCADA"                                                       T.M.  Kovalchuk

                       LLC "ARCADA-BUILDING"                                                R.I. Dobryden

                       LLC "Budevolyutsiya"                                                      O.O. Lapshov