Ukraine’s Financial Stability Council cleared the government to sell its stakes in Sense Bank and Ukrgasbank in August, ending hesitation about opening up the state-dominated banking sector.

The breakthrough decision proves Ukraine wants to build a Western-style free-market economy, even when it means giving up hundreds of millions in wartime funding.

The Financial Stability Council—which includes the National Bank of Ukraine, the Finance Ministry, and banking regulators—concluded that selling the state’s stakes would not harm the banking system if done through proper legal procedures. “The sale of shares must be balanced and aimed at increasing the value of banks’ stakes,” the Council said in its statement.

Both banks fell under state control through crisis management rather than strategic planning. Ukrgasbank gradually moved under state dominance after a 2009 bailout that left the government holding nearly all shares. Sense Bank became state-owned in 2023 when Ukraine sanctioned its Russian owners (including Ukrainian-born oligarch Mikhail Fridman) during the war.

The privatization has fulfilled Western allies’ demands for years—proof that Ukraine genuinely wants a free-market transformation, not just security guarantees. The decision marks a groundbreaking first step toward dismantling the state-dominated banking model.

The choice between free markets and state profits has never been starker. While Sense Bank and Ukrgasbank are smaller institutions—ranking 7th and 10th by profit—they still generate hundreds of millions annually for the war effort.

For now, the state-owned banks control more than half of Ukraine’s financial system assets and deposits, and they’ve become reliable wartime revenue generators. In 2024, the banking sector posted record profits of UAH 104 billion ($2.52 billion), with state institutions contributing the majority. State banks transferred over UAH 67 billion ($1.64 billion) to the budget through taxes and dividends—money that directly funds the war effort.

However, there is still a long road ahead, as the National Bank indicated that privatizations are unlikely to be completed in 2025, emphasizing gradual implementation based on market conditions. That suggests Ukraine recognizes the fiscal reality of giving up billions in annual revenue during wartime.

For international partners, the Council’s decision signals a serious commitment to reform pledges even under extreme conditions. It also potentially means the loss of crucial wartime funding streams for Ukrainian finances.

The privatization path is now clear. Whether Ukraine will walk it—and how quickly—depends on balancing immediate war needs against long-term integration goals.