Contents

  1. Some issues related to the operation of banks during the economic recession
  2. Bringing banks' organization and legal form into compliance with the law
  3. Purchase of foreign currency on the Ukrainian Interbank Currency Exchange Market
  4. Amendment to certain regulatory legal acts issued by the National Bank of Ukraine

1. Some issues related to the operation of banks during the economic recession

Resolution No. 421 of the board of the National Bank of Ukraine of 22.07.2009 "Some issues related to the operation of banks during the economic recession" ("Resolution No. 421").

Resolution No. 421 of the board of the National Bank of Ukraine of 22.07.2009 sets forth:

  • factors to be considered by the Directorate for Banking Regulation and Supervision for the period ending on 01.01.2011 in order to determine sanctions for banks: they will consider performance indicators of the banking system, whether a bank meets its obligations in timely manner and in full, and also the instances when banks are not subject to any sanctions during the above period.
  • requirements applied to the managing bodies of banks suffering losses, in particular, inter alia: to suspend dividend payments to the shareholders or distribution of their equity in any other form, bonuses, rewards or other additional monetary compensation to banks' employees, not to increase the amount of capital investments and intangible assets, not to make payments for consultancy services of a financial nature, and not to open new branches or offices.
  • prohibitions on banks suffering losses, in particular, inter alia: on granting blank loans, on carrying out credit operations with insiders in connection with the granting of new loans or guarantees, on paying off early debentures issued by such bank (except for in special cases), on redeeming its own shares or purchasing on its own behalf nongovernment securities.
  • requirements to supervise compliance with Resolution No. 421 and sanctions imposed on banks or their executives to be applied by the Directorate for Banking Regulation and Supervision if they fail to meet the requirements set forth in Resolution No. 421.

The resolution became effective as of 22.07.2009.

2. Bringing banks' organization and legal form into compliance with the law

Letter of the National Bank of Ukraine dated 24.07.2009 No. 54-019/496 "Bringing banks' organization and legal form into compliance with the law".

With its letter dated 24.07.2009 No. 54-019/496 the National Bank of Ukraine reminds banks established in the form of a closed joint stock company or limited liability company that it is necessary to bring their organization and legal form into compliance with the requirements of the law of Ukraine No. 133-V "On changes to some Ukrainian legal acts governing the legal form of banks and the amount of their charter capital" of 14.09.2006.

Taking into account the above and in connection with the entry into force as of 29.04.2009 of the law of Ukraine "On joint stock companies," banks established in the form of closed joint stock companies must:

  • amend their charters and adapt their restated versions to stipulate, inter alia, that the name of the joint stock company is changed from closed joint stock company to public joint stock company, and to meet any other requirements set forth in the law of Ukraine "On joint stock companies" in their charters;
  • bring their internal regulations into compliance with the requirements set forth in the law of Ukraine "On joint stock companies", and the restated charter.

The reorganization of a limited liability company through its transformation into a public joint stock company is to be carried out under the procedure contemplated by the regulations on the specifics of a bank's reorganization, pursuant to the decision of its owners approved by resolution of the National Bank of Ukraine No. 189 of 27.06.2008. The reorganization plan is to be submitted in 3 copies (stitched, numbered and sealed).

It is stipulated that, in case of failure to meet the above requirements, the NBU will have to impose relevant sanctions on the respective banks and top executives thereof.

3. Purchase of foreign currency on the Ukrainian Interbank Currency Exchange Market

Letters of the National Bank of Ukraine dated 12.08.2009 No. 13- 121/5319-15214 "Explanations with respect to the purchase of non-cash foreign currency for hryvnias on the Ukrainian Interbank Currency Exchange Market", and dated 14.08.2009 No. 13-210/5405-15403.

With its letters, the NBU clarified that:

  • paragraph 16, section 1 "Regulations for the procedure and terms of trade in foreign currency," approved by resolution of the NBU board No. 281 of 10.08.2005 ("Regulations No. 281"), grants banks the right to purchase foreign currency for hryvnias based on the grounds set forth in Regulations No. 281 within the set limits of a foreign exchange position, provided that the obligations in such foreign currency have become mature under civil laws; in case of breach of the foreign exchange position limits it is prohibited to purchase foreign currency on the Ukrainian Interbank Currency Exchange Market for hryvnias to carry out a bank's own operations;
  • the requirements set out in paragraph 16, section 1 of the Regulations No. 281 do not limit the right of banks to purchase foreign currency in cash form for non-cash foreign currency for its further sale through a bank's cash offices and currency exchange offices.

4. Amendment to certain regulatory legal acts issued by the National Bank of Ukraine

Resolution No. 416 of the board of the National Bank of Ukraine of 21.07.2009 "Amendments to certain regulatory legal acts of the National Bank of Ukraine";

Resolution No. 446 of the board of the National Bank of Ukraine of 04.08.2009 "Amendments to certain regulatory legal acts of the National Bank of Ukraine".

NBU board resolution No. 416 of 21.07.2009 ("Resolution No. 416") approved amendments to:

1) section I of the regulations for the procedure and terms of trade in foreign currency approved by resolution No. 281 of the board of the National Bank of Ukraine of 10.08.2005, stipulating, inter alia:

  • the definition of the term "forward contract," being, "a standard document evidencing the obligation of a person to purchase (sell) foreign currency at a specific time and on specific terms in the future at fixed prices for such sale as of the date of the agreement";
  • cancelation of restrictions on foreign exchange operations on the Ukrainian Interbank Currency Exchange Market using hryvnias with foreign currency listed as a Group 1 currency in the foreign currency and bullion classification system approved by resolution of the board of the National Bank of Ukraine on "forward" terms ("Foreign Exchange Transaction") for authorized banks and resident subjects of foreign economic activities to hedge the rate fluctuation risk of foreign currency against hryvnia used in settlements for the export and import of goods without deferred payment or with deferred payment, within the limits set by Ukrainian laws;
  • it is prohibited for banks that have breached the limits of their open foreign exchange position to enter into a forward contract for the effective period of such breach and for a further 30 days after the breach is remedied; and
  • banks are charged with the duty to register a Foreign Exchange Transaction and to confirm that it has been carried out within the agreements confirmation system in operation on the Ukrainian Interbank Currency Exchange Market;

2) resolution No. 108 of the board of the National Bank of Ukraine of 28.02.2009 "Amendments to certain regulatory legal acts of the National Bank of Ukraine", where:

  • as at the date when resolution No. 416 enters into force, the prohibition is revoked for market players to carry out, on the Ukrainian Interbank Currency Exchange Market, foreign currency transactions concerning the purchase/sale of foreign currency for hryvnias on "spot" terms; and
  • as of 26.10.2009, the prohibition is revoked for resident entities to carry out foreign currency and/or bullion purchase and sale operations on "forward" terms.

The resolution comes into force from the date of its official publication; amendments to Regulations No. 281 become effective on 26.10.2009. NBU board resolution No. 446 of 04.08.2009:

1) approves amendments to the regulations for the procedure for issuance of bank licenses, written permits and licenses for specific operations as approved by resolution of the board of the National Bank of Ukraine No. 275 of 17.07.2001 stipulating, inter alia:

  • amendments to the list of operations that banks are entitled to carry out under their banking license and subject to a written permit granted by the NBU; and
  • special requirements necessary to obtain a written permit to carry out certain operations with foreign currency in cash and cheques, trade in foreign currency on the Ukrainian currency market, carry out other operations involving currency values on the Ukrainian currency market, and also transport currency values and money collection; and

2) approves amendments to the regulations for the procedure for the establishment and registration of banks, opening of their branches, representative offices and offices, as approved by resolution of the board of the National Bank of Ukraine No. 375 of 31.08.2001 stipulating, inter alia:

  • detailed norms governing the start of operation of representative offices and branches of foreign banks in Ukraine; banks must reregister existing written permits issued by the NBU to carry out operations, in accordance with the NBU schedule; and
  • additional written NBU permits which banks are to obtain, and banks with insufficient regulatory capital must increase it to the prescribed amount by 01.01.2012.

The resolution came into force on 05.09.2009.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.