Purpose.
To support sustainable economic development by strengthening the capacity of Ukrainian credit unions in expanding agricultural lending, thereby contributing to increased employment and income opportunities in rural communities in Ukraine.
Objectives:
- to improve the legal and regulatory environment for credit unions in Ukraine;
- to improve the services provided to credit unions by specialised associations;
- to increase the level of liquidity of credit unions;
- to expand agricultural financing through credit unions.
The implementation of the CAP Project involves the provision of international technical assistance, including the development of draft laws of Ukraine and regulations, organisation and conduct of trainings and expert sessions.
Products for the National Bank of Ukraine (hereinafter referred to as the National Bank) and the most significant events:
- strengthening of the National Bank’s regulatory and supervisory functions over non-bank financial institutions:
- consultations were held and proposals were provided on:
- regulation of information disclosure in the credit union sector, which were taken into account when developing Resolution of the Board of the National Bank of Ukraine No. 114 dated 5 November 2021 “On Approval of the Regulation on the Procedure for Disclosure of Information by Non-Bank Financial Institutions” (as amended);
- models for supervising credit unions, which will be taken into account when developing the National Bank’s regulations on the regulation and supervision of credit unions;
- a number of workshops and expert sessions were held to study the best international practices regarding:
- credit union capital structure, share capital, management in a credit union, internal control and compliance, peculiarities of control and management of compliance risk in credit unions compared to banks, and the system of monitoring credit unions’ activities, problematic issues of transferring mandatory share contributions of insolvent credit unions, inclusion of credit unions in the deposit guarantee system, liquidity management of credit unions, investor shares, introduction of a countercyclical capital buffer in credit unions;
- conceptual comments and proposals were provided on the draft Laws of Ukraine “On Credit Unions” (No. 5125 dated 22 February 2021) and “On the Deposit Guarantee System” (No. 4452-IV dated 23 February 2012);
- assistance was provided in studying the experience of credit union regulators in Lithuania, the USA, and Poland in regulating non-bank financial institutions;
- proposals were received on the model of a deposit guarantee system for credit union members that could be implemented in Ukraine;
- current results of the activities related to the establishment of the Credit Unions Liquidity Fund were presented. The information received will be used to prepare proposals to increase the opportunities for business entities to use transactions with credit unions, and will be taken into account when finalising the draft Law of Ukraine “On Credit Unions”;
- expert consultations were held on the development and implementation of reporting models for non-bank financial services market participants for the purposes of supervising credit unions and providing expert advice on related issues (work is ongoing);
- proposals were provided for updating the Strategy for the Development of the Financial Sector of Ukraine until 2025 (hereinafter referred to as the Strategy 2025);
- clarifications on the liquidity support system and the stabilisation fund of Lithuanian central credit unions were provided to develop the concept of peculiarities of regulating the activities of united credit unions (hereinafter referred to as “UCUs”);
- expert support provided by the CAP Project to the National Bank’s emergency requests caused by Russia’s military aggression:
- recommendations were received on approaches to regulating credit unions in crisis conditions in Ukraine;
- consultations were provided on:
- searching for financial donors, maintaining market liquidity during military operations, and plans to restore financial stability;
- creating conditions for the resumption of the credit union market and their solvency in the post-war period;
- developing mechanisms for withdrawing from the market credit unions whose activities are economically unreasonable in the context of the financial crisis or pose significant risks to their depositors, as well as mechanisms for settling overdue receivables, including overdue loan portfolios;
- materials (comments) were provided on the risks in the activities of credit unions and supervision processes due to the current military aggression of the Russian Federation (1 June 2022);
a working meeting was held to develop recommendations for credit unions on plans to restore financial stability and further actions in this area were agreed upon (6 June 2022);
- strengthening of the National Bank’s institutional leverage:
- the National Bank’s membership in the International Credit Union Regulators Network (ICURN) was supported;
- the participation and speech of the National Bank’s representative at the International Credit Union Regulators Network Conference (ICURN Conference, 20-22 July 2022 in Montreal, Canada) was supported;
- the participation and online speech of the National Bank’s representative at the World Conference of Credit Unions on the current situation in the Ukrainian credit union market, as well as the necessary assistance and prospects for the future recovery and development of Ukraine, held on 17-21 July 2022 in Glasgow (Scotland) was supported.