National Bank of Ukraine considers emerging systemic risk for the financial stability to be due to unjust court decisions on restoring banks activity, regarding which the decision on revocation of the banking license and liquidation of had been already passed.

NBU emphasizes following emerging systemic risks for the financial stability:

• returning to the market of banks, which were withdrawn from the market for violation of principles of financial monitoring, adequacy ratios, unreliable reporting, unsatisfactory  business reputation of banks owners etc., i.e. “unhealthy” banks, which pose threats to effective and secure functioning of banking system;
• in case of restoration of activity of banks previously withdrawn from the market, returning DGF’s expenses on payments to individual depositors (i.e. budgetary funds) can be continue indefinitely;
• possibility for a borrower to restructure the debt before the bank after receiving the relevant court decision. As a rule, restructuring conditions are defined by the borrower in a claim and are not in line with market conditions. Such way of restructuring is unacceptable  and is such that make impossible to fulfill obligations by the DGF and it undermines the financial stability and inflicts losses of the state;
• banks owners avoiding responsibility for bringing banks to bankruptcy and transition of this responsibility to central bank of the country;
• creation of precedent, which can give a steady signal investors regarding lack of prospects of creation of creditors and business rights protection system broadly in Ukraine.

Therefore, of 6 December 2016 courts passed decisions on restoration of their activity or cancellation of decision on referring them  to the category of insolvent banks. In particular, the following banks: Kapital, Skhidno-promyslovyi commercial bank, Veles, Radykal Bank, Ukrinbank, Premium, Soyuz, Finansova initsiatyva, Kyiivska Rus.

“Such court decisions have already created a precedent when judicial system is used by owners of banks withdrawn from market, for their personal use and as a quasi-legitimate instrument for such banks to return to the market. In its turn, it undermines NBU efforts aimed at restoring financial health of Ukrainian banks and clean-up of the banking sector from “zombie”  and “laundry” banks”, stressed Mr Oleh Zamorskyi, Director of Legal Department of the National Bank of Ukraine.

NBU addressed the Supreme Court of Ukraine with the respective claim regarding review of decisions of cassation instance.

NBU also stresses the importance of carrying out judicial reform as soon as possible that would make corruption impossible and enhance the efficiency of the judicial reform and restore confidence in judicial decisions, business and society.

For reference

The procedure for registering legal entity, which is not aimed at performing banking activity, regulation of such activity and bank liquidation is provided by the legal acts of Ukrainian legislation. Along with that, legislation does not provide for a mechanism for restoring bank’s activity, including through court decision, regarding which the decision on revocation of the banking license and liquidation was passed.

Due to lack of legislative mechanism, National Bank of Ukraine has to file to the court with claim regarding setting the procedure and way of execution of court decision on restoring banks activity, regarding which the decision on revocation of the banking license and liquidation of had been already passed.

Of 6 December 2016, payments to individual depositors of insolvent banks for 2014-2016 made UAH 79.6 billion.