The National Bank of Ukraine welcomes parliament’s adoption of Draft Law No 6010 On Simplified Procedures of Bank Capitalization and Restructuring as a basis and hopes that this bill will be passed in second reading. A total of 235 MPs voted in favor of this bill in first reading. 

The NBU is confident that small and medium-sized banks should be given an opportunity to have an orderly consolidation procedure to enable them to meet the recapitalization requirements.  Under current legislation, banks meet additional capital requirements  to increase the bank’s authorized capital through additional contributions by banks’ shareholders. However, in opinion of the NBU,  another possible alternative option  would be the consolidation of the banking sector through mergers.  However, given that the existing merger procedures are too complicated and lengthy, there is an urgent need to simplify and shorten them

Draft Law No.6010 is intended to shorten the duration of bank reorganization procedures  from a year and a half to three-four months.

This draft law provides, inter alia, for the following:

• a simplified reorganization procedure shall apply to all the banks, including those banks that do not require additional capital; A simplified capitalization procedure through contributions by shareholders will apply to all the banks that have  documentary evidence on the source of funds used  as equity injections.
• capitalization and reorganization procedures will be shortened through the acceleration of regulatory and corporate approvals, as well as a reduction in the number of documents required for securing  approval from regulators - the NBU, the AMCU, the State Fiscal Service (SFS) and the National securities and Stock Market Commission; and
• withdrawal of a banking license will not be followed by the liquidation of a legal entity; This move would grant banks the option to withdraw from the banking market and continue to operate as a legal entity,  including in the financial (non-banking) sector. This being said, to have its banking license revoked without being placed into liquidation, a bank will have to meet its obligations to depositors and other creditors.

As a side note, this draft law was registered in parliament as a replacement to Draft Law No.5539. The NBU contributed to efforts to design this bill. The draft law would amend  Law of Ukraine No.78-VIII On Measures to Facilitate Bank Capitalization and Restructuring passed in 2014 as an anti-crisis measure to rehabilitate the banking sector, which will remain in effect through 1 August 2020