The Ukrainian government said in a statement that it was now the "100% owner of PrivatBank and guarantees the uninterrupted functioning of this institution and the safety of its clients' money."
The bank belonged to Igor Kolomoyskiy - a politically powerful billionaire who became an early target of Ukrainian President Petro Poroshenko's uphill fight against corruption, and Gennady Bogolyubov.
According to local media reports, the bank had lent money to some of select insiders who never repaid the loans.
It is thought that the value of loans Kolomoysky granted himself and other insiders makes up 80% of the bank’s loan portfolio. Dragon Capital economist Sergiy Fursa said that "80% to 90% of PrivatBank's loans were to institutions" controlled by Kolomoyskiy himself.
"This was insider lending -- in other words, money was withdrawn by its owners from the bank."
Kiev's decision falls in line with International Monetary Fund's demand for Ukraine to clean up and stabilize its murky financial sector in order to achieve sustainable growth, so it can receive the next installment of the international loan.
PrivatBank failed a stress test in September 2016.
PrivatBank, the largest bank in Ukraine, commands 20% of the market.
Ukraine’s PrivatBank is also the key shareholder of Latvia’s PrivatBank, which at the end of June 2016 was the 11th largest bank in Latvia.
