Granting Ukraine the status of a candidate for membership of the EU opens up wider opportunities for the NBU to implement European integration processes in finance and brings the central bank as close as possible to meeting one of its key objectives.
"The issue of European integration is constantly in the NBU’s focus. According to our vision, we see the NBU as a full member of the European community of central banks. Obtaining the status of a candidate for membership of the EU brings us significantly closer to achieving this goal,” said NBU Governor Kyrylo Shevchenko in a comment about the results of the European Council summit. "We will stay the European course as we continue to transform and develop Ukraine’s financial system. As the central bank of a candidate for EU membership, we will have much broader opportunities to meet our European integration objectives."
The NBU’s European integration efforts have been aimed at the implementation of the Association Agreement. To this end, the NBU is constantly working to implement EU acquis in Ukraine’s legislation, to adopt international standards in financial services, to put to life the decisions of bilateral bodies of the EU-Ukraine Association, to honor other international legal commitments and agreements we committed to fulfill as part of our European integration efforts, and to strengthen confidence in the NBU as a central bank that upholds EU standards in its activities.
What the NBU has already accomplished in terms of European integration
To ensure the maximum approximation of Ukraine’s financial sector regulation to EU standards and regulations, the NBU has placed a special focus on drafting comprehensive legislative changes and improving the regulatory framework in banking regulation and supervision, payment systems, insurance, credit cooperation, financial reporting, AML/CFT, and the digital market, in line with its commitments under the Association Agreement between Ukraine and the EU.
Jointly with the Verkhovna Rada of Ukraine, the NBU in 2021 brought Ukraine’s financial sector regulation much closer to EU standards, thus making significant progress in implementing the EU-Ukraine Association Agreement.
Fundamental Ukrainian legislation has been drafted and passed that draws on the provisions of the EU laws governing financial services and implements key EU directives and regulations in this area. Specifically:
- Law of Ukraine No. 1587–IX On Amendments to Certain Laws of Ukraine on Improving Corporate Governance in Banks, and Other Operational Issues of the Banking System (Law No. 1587-IX) was passed a year ago. IMF staff members were engaged in drafting the law. The law provides for bringing the banking law of Ukraine closer to EU legislation based on provisions of Directive 2013/36/EU and Regulation (EU) No. 575/2013.
Certain provisions of Law No. 1587-IX will be implemented within three years, but the intensive implementation and application of the law has already begun. The NBU has drafted and approved a number of regulations governing, among other things, the organization of corporate governance in banks, the internal capital adequacy assessment process in banks and banking groups, and the supervision of banks on a consolidated basis.
- In June 2021, the Verkhovna Rada passed the Law On Payment Services (Law No. 1591–IX), which had been drafted in line with EU acquis, including Directive (EU) 2015/2366 and Directive 2009/110/EU. The implementation of this law will modernize the Ukrainian payment market, lay the groundwork for its development, and build a legal framework to integrate the payment systems of Ukraine and the EU.
The NBU is currently actively involved in updating and developing regulations in the field of payment services. Those include provisions governing cashless payments, the opening and closing of user accounts by payment service providers, the conduct of electronic money transactions, the execution of interbank payment transactions, the engagement of commercial agents to provide financial payment services, the authorization of payment service providers, the registration of payment systems, their participants, and technical service providers, the oversite of payment infrastructure, and more.
- In November 2021, the Verkhovna Rada passed the Law of Ukraine On Insurance (Law No. 1909–ІХ), which draws on Directive (EU) 2009/138 and Directive (EU) 2016/97.
The law introduces a new model of regulation that aims to establish in Ukraine a solvent, stable, and competitive insurance market that will adequately protect the rights of insurance services consumers. The document envisages, among other things, improving licensing requirements for insurers, assessing their solvency and liquidity, building an effective corporate governance system, applying risk-based prudential supervision, introducing procedures to resolve insurers and transfer the insurance portfolio, and setting new requirements for insurance intermediaries.
Most provisions of this law take effect on 1 January 2024. The NBU is working hard to develop the regulations necessary for its implementation.
Other issues in financial services that are important for the implementation of our European integration aspirations and that the NBU continues to work on include:
- support in the Verkhovna Rada of the draft Law of Ukraine On Credit Unions (registered as No. 5125), which is being prepared for second reading
- continuation, jointly with experts from the World Bank and the Deposit Guarantee Fund, of work to develop a draft law to resolve bank insolvency in accordance with Directive (EU) 2014/59, which establishes framework provisions for rehabilitation of credit institutions and investment companies
- preparation of a new version of the Law of Ukraine On Compulsory Insurance against Civil Liability in Respect of the Use of Land Motor Vehicles that takes into account Directive (EU) 2009/103 on civil liability insurance in connection with the use of motor vehicles and ensuring compliance with commitments to insure such liability
- continuation of currency liberalization efforts that are envisaged by the Roadmap (developed jointly with the IMF) to abolish FX restrictions after the situation in Ukraine stabilizes and economic conditions improve.
New challenges and opportunities
As a result of the EU summit, the NBU as a regulator of the financial services market of Ukraine has additional commitments and objective to meet.
- fulfillment of Ukraine’s commitments to obtain the EU’s single domestic market regime, in particular the approximation of Ukrainian financial services legislation to EU acquis and the continued liberalization of capital movements
- enhancing cooperation with European institutions, including the European Commission, the European Central Bank, the European Banking Authority, the European Insurance and Occupational Pensions Authority, central banks and supervisors of EU Member States
- promoting a new exclusive EUR 9 billion macrofinancial assistance package to support macroeconomic stability and other EU assistance
- ensuring closer integration of the Ukrainian and European financial markets and open access for their participants to additional instruments for making international payments, and taking, together with interested government agencies, steps towards Ukraine’s accession to the Single Euro Payments Area
- effective communication on the NBU’s role in the European integration process in order to strengthen the level of domestic support for Ukraine’s membership of the EU
- participation in the revision of the list of priority European integration draft laws
- strengthening cross-sectoral cooperation with the government of Ukraine to identify measures aimed at restoring the Ukrainian economy after the war, and further participation in their implementation
- fulfillment of EU conditions stipulated in the conclusion based on the consideration of Ukraine’s application for membership of the EU.
The NBU will continue to take a set of necessary measures to ensure that Ukraine meets its European integration commitments in order to gain the status of an EU member state.