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Requirements to Corporate Governance in Banks to Tighten

Members of the Verkhovna Rada of Ukraine have registered Draft Law No4367 On Amendmends to the Law of Ukraine On Banks and Banking.

The main purpose of this Draft Law is to improve corporate governance in banks, as well as to strengthen responsibility of the supervisory board and the management board of banks, the internal control system, and risk management.

"Adoption of the Law will further align the Ukrainian banking laws with the EU laws and promote the implementation of the best global practices in banking. The Law will expand the responsibility of bank management bodies for decision-making, advance operational transparency and stability of certain banks, as well as of the banking system in general," noted Kyrylo Shevchenko, Governor of the National Bank of Ukraine (NBU).

The Draft Law introduces a new capital structure (including capital buffers) that will enhance bank capacity to absorb losses, as well as additional requirements to members of the supervisory and the management boards regarding their collective fitness and propriety. Also, modern international supervisory instruments will be introduced such as:

  • the right of the regulator to demand to change the composition of the supervisory board and/or the management board if the current composition of these bodies does not ensure the effective management and control over the bank’s activity
  • the right of the regulator to set individual economic ratios for banks in line with their risk appetite.

Furthermore, the Draft Law clarifies certain banking provisions, including the ones concerning the consolidated supervision of banking groups, bank licensing, approval of acquiring a qualifying holding in a bank and requirements to bank ownership structures.

 

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