The National Bank of Ukraine urges MPs back a draft law intended to simplify consolidation procedures in the banking sector. These provisions are set forth in Draft Law No 5388 On Amendments the Law of Ukraine On Measures to Facilitate Bank Capitalization and Restructuring, which has recently been tabled in Parliament.
“Presently, the requirements to increase the bank’s authorized capital are met through additional contributions by banks’ shareholders. However, there is an alternative way of fostering consolidation of the banking industry through mergers. The existing merger procedures are too complicated and lengthy. Draft Law No.5388 intends to simplify the bank reorganization procedure by shortening its duration by sevral months - from a year and a half to three-four months,” underlined Head of the NBU Registration and Licensing Office Mr Oleksandr Bevz.
Mr Bevz said that this draft law would amend Law of Ukraine No.78-VIII On Measures to Facilitate Bank Capitalization and Restructuring passed in 2014 as a crisis-response measure to rehabilitate the banking sector. Draft Law No.5388 will extend the main provisions of Law of Ukraine No. 78-VIII until 1 January 2019.
Thus, Draft Law No. 5388 envisages that 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. The shortening of capitalization and reorganization procedures would be made possible due to 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.
In addition, this draft law would allow banks: to have their license revoked without the winding-up of a legal entity, which would enable banks to voluntarily withdraw from the banking market and continue to operate as a legal entity, including in the financial (non-banking) sector.
“In other words, this would enable a legal entity that has had its license revoked to continue to operate as a legal entity and carry on financial business other than banking business, meaning a shift in their activities. This being said, to have their license revoked without having a bank liquidated, a bank will have to meet its obligations to depositors and other creditors,” said Head of the NBU Registration and Licensing Office.