The National Bank of Ukraine welcomes Parliament's decision to simplify capitalization and reorganization procedures for banks. Today the Ukrainian Parliament approved in second reading Draft Law No. 6010 On Simplifying Capitalization and Reorganization Procedures for Banks. A total of 253 MPs voted in favor of this bill.
According to NBU data, as of today, 37 banks are required to increase their authorized capital to at least UAH 200 million by 11 July 2017. This draft law primarily aims to help these banks meet the requirements set by the regulator. However, all banking institutions may take advantage of this draft law as well.
The NBU seeks to put in place a mechanism to ensure an orderly consolidation of small and medium-sized banks, thus enabling them to meet the recapitalization requirements set by the central bank. Under current legislation, banks meet additional capital requirements to increase their authorized capital through additional contributions by banks’ shareholders. Draft Law No 6010 opens up the possibility to consolidate the banking sector through mergers. However, given that the existing merger procedure is too complicated and lengthy, the NBU strongly pushed for its implication and streamlining.
Draft Law No.6010 adopted by parliament will make it possible to shorten the duration of bank reorganization procedures from a year and a half to three-four months. 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, Draft Law No 6010 allows the withdrawal of a banking license without a requirement to liquidate banks as legal entities. This move would grant banks the option to withdraw from the banking market and continue to operate as a legal entity, including in the financial (non-banking) sector. This being said, to have its banking license revoked without being placed into liquidation, a bank will have to meet its obligations to depositors and other creditors.
Draft Law No. 6010 will amend Law of Ukraine No.78-VIII On Measures to Facilitate Bank Capitalization and Restructuring passed in 2014 as an anti-crisis measure to rehabilitate the banking sector, which will remain in effect through 1 August 2020.