The decision of the National Bank of Ukraine (NBU) to disqualify five of Oschadbank's newly elected Supervisory Board members is an unprecedented challenge to the corporate governance reform in state-owned banks, according to a joint statement of the members of the Supervisory Board of the financial institution.

"Five highly-experienced professionals with unimpeachable credentials and reputations were found to be unsuitable by the NBU review committee, with no explanation given. In the absence of an explanation, we can only infer from the NBU's public statement released today that the real reason for the disqualification was the displeasure expressed by some NBU committee members with the Board's recent decision to renew the employment contract of Oschadbank's CEO, Mr Andriy Pyshniy," they said in the statement posted on the website of the bank.

According to the statement, the decision to extend the contract with the board chairman was taken in full compliance with our statutory powers under Ukrainian law and Oschadbank's Charter and with the full knowledge of the National Bank at each stage of the decision-making process. "As a result, the National Bank's decision to disqualify us is in our view be a breach of the law and could have the unfortunate impact of undermining Ukraine's nascent corporate governance reforms. This is a vital matter of principle - if Supervisory Boards are only allowed to operate if they take decisions favoured by regulators, then the reforms will have achieved nothing," the members of the supervisory board said.

According to the statement, the members of the Supervisory Board of Oschadbank have been duly appointed in accordance with the law on banks and banking and the independent members among us have undergone a rigorous assessment by an arms-length respected international recruitment company from among several hundred domestic and international candidates. During the selection process, a major international recruitment consultancy firm and the government-appointed Selection Board assessed all applicants against compliance with requirements of the law, including NBU requirements and regulations, and submitted all necessary documents to the Cabinet of Ministers of Ukraine for approval.

"For two months, Oschadbank's Supervisory Board has been working in accordance with our mandate in strict compliance with Ukrainian law, especially legislation regulating the banking sector and Oschadbank's Charter. Crucially, all of the decisions relating to the CEO assessment process, were (and continue to be) made in the presence of the NBU's representative to the Supervisory Board, an accountability measure to ensure that the NBU is aware in real time of the Supervisory Board's deliberations," they said.

"We set very high international-standard criteria for the CEO selection, and engaged international executive search specialists to assess the performance of Oschadbank's CEO, Andriy Pyshniy, against these criteria. After a rigourous vetting it has been reported that the CEO met or exceeded the criteria and was suitable to move the Bank towards realization of its strategy and mission. We further reviewed Oschabank's results over the past five years, especially the last two, where we benchmarked progress against the bank's strategic plan, approved in 2018 by the Cabinet of Ministers and the National Bank," the members of the supervisory board said.

Based on this performance (indeed, objectively, the CEO has engineered a remarkable turnaround of Oschadbank since 2014), and the fact that there were no extenuating reasons to remove him, the Supervisory Board exercised it exclusive powers to continue the CEO's employment, as we are permitted to do in full accordance with the law and the bank's Charter, powers which have been approved by the NBU.

"Had we not endorsed the assessment, we would then have called for an open competition to hire a new CEO, since the position would now be vacant. There were no objections at any time with respect to the procedures followed and the substance of the discussions from the NBU's representative to the Supervisory Board. We are fully confident of the propriety and legality of all of our decisions, which are taken in the best interests of the bank," they said.

Members of Oschadbank's Supervisory Board Sevki Acuner, Oleksii Grinchenko, Oleksii Reznikov, Dmytro Vlasov, Baiba Apine, Michael Weinstein, Daniel Bilak and Peter Briggs signed the statement.