The Law of Ukraine On Financial Restructuring has authorized the National Bank of Ukraine to apply sanctions against banks violation of the requirements of this Law. The relevant procedure for the application of sanctions has been approved by NBU Board Resolution No. 392 of 13 October 2016.

Petitions for the application of sanctions against banks may be submitted to the NBU by a debtor, or  special authorities established as mandated by the Law of Ukraine On Financial Restructuring: a supervisory council, a secretariat or an arbitration committee (initiators).

A description of the violation committed by a bank and copies of documentary evidence (if available) certified by an initiator shall be attached to the petition. The relevant structural unit of the NBU shall review the submitted documents and prepare and submit to the Committee on Banking Supervision, Regulation and Payment System Oversight  a relevant draft decision. It is this Committee of the central bank that makes a final decision on whether to apply sanctions.

In order to establish whether the bank against which a petition for the application has been lodged has violated the Law of Ukraine On Financial Restructuring, an authorized structural subdivision of the NBU shall turn to this bank seeking to get explanations and/or copies of documentary evidence.

However, a failure by the bank to provide explanations and/or copies of documentary evidence in due time upon the request of the authorized structural unit shall not constitute the basis for the Committee not to make a decision on the application of sanctions against this bank.

The NBU shall issue a decision to this effect within 30 days from the day the receipt of a complete package  of documents from an initiator.

The fine shall be set and paid to State Budget of Ukraine in UAH. In its turn, the bank is required to notify the authorized structural unit of the NBU in writing of the payment of a fine within five business days of the fine payment date.  In addition, the bank shall submit a copy of the document certified by the bank confirming the payment of the fine.

Banks may challenge in court  sanctions imposed against them.

The Law of Ukraine On Financial Restructuring provides for the application of sanctions against banks for the following violations:

• a failure by the engaged creditor to provide financing to the debtor subject to the approved restructuring plan – shall be punished  by a fine in the amount of 5% of the amount of financing that has not been provided
• the foreclosure of the debtor's property and the property pledged to third parties as collateral against the debtor's liabilities; the seizure of the debtor's property or gaining control of the debtor's property during the moratorium  – shall be punished  by a fine in the amount of the value of the property that has to be returned to the debtor
• violations related to to offsetting counterclaims – the imposition of a fine in the amount of 125% of the amount of the claim against which the counterclaims have been offset
• violations of the terms of the agreement providing for deferment of the foreclosure of mortgage  during the validity of this agreement –  shall be punished  by a fine in the amount equal to the value of the mortgage collateral. The engaged creditor shall be required to refund the amount equal to the value of the mortgage collateral to the debtor.
• non-compliance with the arbitral award by the litigant – shall be punished  by a fine in the amount of 1,000 minimum wages.

In accordance with the Law of Ukraine On Financial Restructuring, sanctions shall be applied by:

• the National Bank of Ukraine against banks;
• the National Commission for the State Regulation of Financial Services Markets against other financial institutions;
• the authority established by the Cabinet of Ministers of Ukraine against other entities.

Resolution No. 392 shall enter into force on the day following its official publication, but not earlier than the entry into force of the Law of Ukraine On Financial Restructuring.

For reference

The Law of Ukraine On Financial Restructuring adopted  on 14 June 2016 is intended  to create an efficient  out-of-court settlement mechanism to settle disputes between creditors and enterprises over non-performing debt.  The financial restructuring procedure  provides for voluntary rather than obligatory participation of all companies. Debts shall be restructured based on terms agreed by all parties involved.   The developed legal mechanism for  restructuring of nonperforming loans will help accelerate the recovery of the financial and corporate sectors.

This draft law is a structural benchmark set by the IMF program and one of the objectives set out in the Comprehensive Program of Financial Market Development of Ukraine until 2020.