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NBU Disagrees with Court’s Ruling on Claims of Oschadbank’s Former Chairman and Members of Supervisory Council and Intends to File Appeals in Higher Courts

The National Bank of Ukraine (NBU) intends to file appeals on rulings of District Administrative Court of Kyiv as of 18 and 19 February that satisfied complaints of Mr Sevki Acuner, former Chairman of Oschadbank Supervisory Board, as well as Dmytro Vlasov and Oleksii Reznikov,  ex-members of the Supervisory Board. The court declared unlawful and canceled the decision of NBU’s Committee on Banking Supervision and Regulation, Oversight over Payment Systems (hereinafter – the Committee) on denial to approve their candidacies for the positions of Chairman and members of Oschadbank Supervisory Board.

NBU does not agree with such ruling since approving managers of banks, including the chairperson and members of a supervisory board lays within NBU’s exclusive competence pursuant to Article 42 of the Law of Ukraine On Banks and Banking.

“Taking such decisions, the court undertakes NBU’s functions, while the central bank is a special public authority entrusted with relevant powers under the banking law. We believe that the court in exercising its powers contradicts the Constitution of Ukraine, i.e. Article 6 and Article 19, part two, and violates Article 53 of the Law of Ukraine On the National Bank of Ukraine (the NBU Law).  According to Article 53, no interference of public authorities and other public institutions or their officials, any legal entities or individuals in the exercise of functions and powers of the NBU, NBU Board or NBU employees shall be allowed, except for within the limits stipulated by  the Constitution of Ukraine and the NBU Law,” - informed Viktor Hryhorchuk, Head of Litigation Office of NBU Legal Department.

In 2019 the NBU Qualification Commission tested and interviewed candidacies of Sevki Acuner, Dmytro Vlasov and Oleksii Reznikov. Most of Commission’s members concluded they could not award a positive opinion to the candidates based on the interview results. Considering recommendations received from the Commission, the Committee did not approve the mentioned candidates. 

More details on grounds to reject Sevki Acuner’s candidacy:

  1. Conflict of interest

Sevki Acuner being a Chairman of the Oschadbank’s Supervisory Board at the same time is the Chairman of supervisory boards of two big state-owned companies, which are the bank’s clients (Ukrenergo NPC and Ukrzaliznytsia JSC). It suggests potential conflict of interest in interactions between the bank and each company stated.

Being a Chairman of supervisory boards of the companies noted above and having mandate for organization of their activity, he can influence the decision-making process in these companies.

At the same time, please note that according to Article 7 of the Law of Ukraine On Banks and Banking appointment of a person for the position of a member of a supervisory board in a state-owned bank shall be prohibited, if it can lead to a conflict of interest.

  1. Improper Performance of Duties by Chairman of Oschadbank’s Supervisory Board

Analyzing the circumstances under which the Supervisory Council extended the powers of Chairman of Oschadbank’s Board, the NBU has found improper execution of duties by Sevki Acuner in his capacity as Chairman of the bank’s supervisory board. In this case a procedure for competitive selection has been violated.

Procedural violations in the supervisory board’s work are as follows:

  • The Chairman of the supervisory board failed to send materials and Agenda to members for a meeting at which the powers of Chairman of the Oschadbank’s Board were extended.It deprived other supervisory board members to get informed with the respective materials
  • The issue on extending the powers of Chairman of Oschadbank’s Board was submitted for consideration with no opinions and proposals on the legitimacy of the procedure by the Staff and Remuneration Committee of the bank’s supervisory board
  • After one of the supervisory board members commented regarding procedural violations during preparations for the meeting, the considering of issue was not postponed
  • The Minutes were signed with violations of time designated for the respective signing under the Law of Ukraine On Joint Stock Companies. Consequently, a full text of Minutes could not be provided to the NBU upon its request.

More details on grounds to reject Dmytro Vlasov’s candidacy:

  1. Insufficient fit and proper level

Candidate’s interview results showed insufficient professional level and its noncompliance with the size of Oschadbank and its specificity, as well as tasks that are set before the bank’s supervisory board.     

  1. Improper execution of duties by a member of Staff and Remuneration Committee of Oschadbank’s supervisory board and Risk Committee

In this case procedural requirements have been neglected during preparations of proposals to extend the powers of the Chairman of the Oschadbank’s Board. Dmytro Vlasov failed to address the issue. This led to insufficient provision of information for other Board members to take a decision. Moreover, during the interview Dmytro Vlasov demonstrated that the issue of sticking to the procedure was irrelevant, in his opinion.

More details on grounds to reject Oleksii Reznik’s candidacy:

  1. Improper execution of duties by Head of Staff and Remuneration Committee of Oschadbank’s supervisory board

A number of procedural violations were made by the bank’s Supervisory Council during deciding on extending powers of the Chairman of Oschadbank’s Board by the Staff and Remuneration Committee. As Oleksii Reznikov was a Head of the Committee, he had to ensure the Committee’s proper function and operation.  

The NBU notes that these rulings of the court of first instance took no effect. NBU will file appeals after receipt of full texts of rulings.

“By cancelling the NBU’s decisions, the court actually raises doubts about the ability of the central bank to perform its lawful powers. Since the right to approve supervisory board members for state-owned banks undoubtedly belongs to the NBU under Article 7 of the Law of Ukraine On Banks and Banking. Reforms of corporate governance in state-owned banks should not mean only a formal conformity assessment of potential members of supervisory boards. We are certain that denial to approve the above candidacies was compliant with the spirit and essence of corporate governance reform, taking into account their irrelevant attitude to their duties,” - explained Kateryna Rozhkova, NBU First Deputy Governor.

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