Since 2014, the National Bank of Ukraine has been engaged in consistent efforts to clean up the domestic banking sector from insolvent banks involved in syphoning off funds and illegal money-laundering operations.
However, the regulator’s efforts are hampered by illegitimate court rulings allowing banks to resume their operation and overturning NBU decisions to resolve failed banks.
Thus, as of 1 May 2017, illegitamate rulings issued by the courts regarding 12 banks entered into force. These banks included: Bank Financial Initiative, Union, Ukrainian Innovation Bank, Premium, Capital, Bank Veles, Radical Bank, TK Credit, EAST-INDUSTRIAL BANK, KYIVSKA RUS, KSG BANK and KHRESCHATYK.
The NBU has appealed to higher courts, seeking to challenge illegitamate rulings issued by courts of lower instances. For instance, in April 2017, the NBU filed a cassational appeal with the the Higher Administrative Court of Ukraine to overturn the court of appeal’s ruling regarding KSG BANK.
On 30 August 2016, the NBU revoked a license held by KSG BANK for systematic breaches of financial monitoring laws.
The NBU has repeatedly emphasized that illegitamate rulings issued by courts allowing the banks that have been resolved to resume operation could pose systemic risks to the financial stability since the owners of these banks use the judicial system as a quasi-legitimate instrument to return these banks to the market. In its turn, it undermines the NBU efforts aimed at restoring the health of the domestic banking system.
NBU also stresses the importance of implementing judicial reform as soon as possible that would eradicate corruption and enhance the efficiency of the judicial reform and restore confidence in judicial decisions,” said Director of the NBU Legal Department Oleh Oleh Zamorskyi.
The procedure for registering legal entity, which is not aimed at performing banking activity, regulation of such activity and bank liquidation is provided by the legal acts of Ukrainian legislation. Along with that, legislation does not provide for a mechanism for restoring bank’s activity, including through court decision, regarding which the decision on revocation of the banking license and liquidation was passed.
Due to the lack of a legal mechanism, the NBU has to appeal to the court requesting to establish a procedure for enforcing court judgements allowing the banks regarding which the decision on revocation of the banking license and liquidation had been already passed to resume operation.