The National Bank of Ukraine has improved the procedure of taking action against troubled/insolvent banks and banks engaged in risky activities by working out in detail the procedure of classifying banks as troubled /insolvent under Articles 73, 75 and 76 of the Law of Ukraine On Banks and the Banking (hereinafter referred to as the Law on Banks) and providing definitions for the relevant terms mentioned in the Law on Banks.

Thus, on 15 August 2014 the Board of the National Bank of Ukraine issued Resolution 494 On approval of the Amendments to the Rules of Taking Action by the National Bank of Ukraine upon Violation of the Banking Law (hereinafter referred to as Resolution 494) which enters into force as of the date of its official publication.

This resolution was passed pursuant to requirements of paragraph 5 of the Final and Transitional Provisions of the Law of Ukraine No 1586-VII of 04 July 2014 On the Amendment of Certain Legislative Acts of Ukraine on Preventing Adverse Impact on Stability of the Banking System.

Grounds for placing a bank into ‘troubled’ or ‘insolvent’ category are set out in Articles 75 and 76 of the Law on Banks, respectively.

Note that Resolution 494 stipulates no additional cases (other than those mentioned in Articles 73, 75 and 76 of the Law on Banks) for taking action against a bank, including placement of a bank into ‘insolvent’ category.

At the same time, according to Article 75 (1) of the Law on Banks the criteria under which the central bank may classify a bank as troubled include, in particular, systematic breach of law on preventing and combating legalization (laundering) of proceeds from crime.

It is also worth noting that under Article 75 (2) of the Law on Banks the National Bank of Ukraine has the right to place a bank into ‘troubled’ category for other (in addition to those set out in part one of this Article) reasons provided by regulatory acts of the National Bank of Ukraine.

Thus, in accordance with the Law on Banks Resolution 494 has, in particular, expanded the list of other grounds on which the National Bank has the right to place a bank into ‘troubled’ category. These grounds include, in particular, instances when a bank is engaged in risky activities which threaten interests of that bank’s depositors or other creditors, or when foreign countries or intergovernmental associations or international organizations have applied sanctions to a bank or its major stakeholders which threaten interests of that bank’s depositors or other creditors and/or stability of the banking system.