The National Bank of Ukraine (NBU) has prepared a fully transparent procedure for applying corrective measures to banks and nonbank financial institutions. This was a step towards implementation of a single risk-based approach to supervision.
The NBU is open to an ongoing dialogue with the market participants subject to inspections. The regulator can meet with them not only at the start of an inspection but also in the course of it and after its completion. Such meetings may include discussions of any matters regarding organization of inspections, their findings, registered violations, detected issues, and given recommendations.
In addition, representatives of inspected institutions may participate in the meetings of the Committee on Banking Supervision and Regulation and Oversight of Payment Systems. The Committee’s meetings review preliminary supervision findings, recommendations on eliminating violations, and suggestions on applying adequate corrective measures. Representatives of financial institutions attending such a meeting can provide explanations to the existing circumstances and registered violations so that the regulator considers them when approving collegial decisions on corrective measures within the Committee’s authority.
It should be noted that the NBU makes active efforts to standardize the said practice: it has already approved amendments to Regulation No. 276[1] and drafted amendments to Regulation No. 197[2] and Regulation No. 338[3], which will be approved in the near future.
Apart from the above amendments, the NBU took into account suggestions from the institutions and doubled (from 10 to 20 calendar days) the time for notification of the start of an offsite inspection on the matters of financial monitoring and compliance with the currency laws. The NBU also provides all market participants with a list of items of an offsite inspection.
Aiming to advance electronic workflow across the banking system, the NBU intends to enable electronic submission of certificates or statements on the findings of financial monitoring supervision and currency supervision.
In addition, in cooperation with the banking community and to implement effective instruments of financial monitoring supervision, the NBU intends to amend Regulation No. 197 with a list of templates for replying to requests, which are used for off-site inspections on financial monitoring.
The templates will save the time spent on preparation of information requested by the NBU and ensure the high quality of supervision.
[1]The Regulation On Organizing and Conducting Inspections approved by NBU Board Resolution No. 276 dated 17 July 2001 (as amended by NBU Board Resolution No. 145 dated 28 December 2017)
[2] Regulation No. 197 On Procedure for Organizing and Conducting Inspections on Preventing and Countering Legalization (Laundering) of Proceeds of Crime, Financing of Terrorism, and Financing of Proliferation of Weapons of Mass Destruction dated 20 June 2011 (as amended by NBU Board Resolution No. 499 dated 31 July 2015) (hereinafter referred to as Regulation No. 197)
[3]Regulation No. 338 On Procedure for On-Site and Off-Site Inspections Regarding Compliance with Currency Laws by Banks, Nonbank Financial Institutions, and Postal Service Operators and Inspections of Currency Exchange Offices in the Territory of Ukraine approved by NBU Board Resolution No. 338 dated 21 September 2007 (as amended) (hereinafter referred to as Regulation No. 338)