The NBU welcomes the Ukrainian parliament’s decision to adopt, at first reading and as a whole Ukraine’s draft law On Amending Some Laws That Improve State Regulation of Financial Services Markets (before the adoption referred to as draft law No. 1069-2). A total of 296 MPs voted in favor of the draft law.
The adopted law provides for what has been termed “the split” – dissolving the National Commission for State Regulation of Financial Services Markets and splitting up its regulatory functions between the NBU and the National Securities and Stock Market Commission.
In particular, the NBU will be responsible for regulating insurance, leasing and financial companies, credit unions, pawnshops, and credit bureaus, while the National Securities and Stock Market Commission will be charged with regulating private pension funds and construction financing funds.
“Thanks to the banking sector reform conducted by the NBU, the sector is transparent, well-capitalized, profitable, and is actively serving retail clients,” said NBU Governor Yakiv Smolii. “The Split Law provides the NBU with additional ways to realize its mandate to safeguard financial stability. The Split Law allows the NBU to finalize financial sector reform, applying transparency, reliability, and effectiveness requirements not only to banks but also to the nonbank financial sector.”
This law will provide a well-balanced and systematic approach to the effective development of the nonbank financial sector, the transition from a sectoral regulatory model to a more effective integrated model, and will lay the foundations for the full development of market conduct regulation and consumer rights protection on the financial market.
The Split Law will help Ukraine build a financial system that is in line with international standards. That is why the adoption of the said law was one of the key requirements imposed by Ukraine’s international partners.
The law envisages a transition period during which the functions of the National Commission for State Regulation of Financial Services Markets will be transferred to the NBU and the National Securities and Stock Market Commission. The transition period will end on 1 July 2020. During this time, the NBU and the commission will develop the necessary processes and structures in order to take over the functions. In parallel, they will involve a wide range of experts and nonbank financial sector participants in improving legislation and regulations.
Up to and including 30 June, the financial services market will be regulated by the National Commission for State Regulation of Financial Services Markets. However, already from 1 July 2020 this function will be performed by the NBU.
As early as last year, the NBU launched public discussion of a draft model for regulating nonbank financial institutions – a so-called White Paper. This document outlines the NBU’s approaches to market segmentation, licensing, prudential supervision, reporting, inspections, corporate governance, and consumer rights protection.
The NBU also plans to continue developing white papers containing detailed proposals for regulating individual segments of the nonbank financial market, which will also be widely discussed by financial institution representatives, experts, and other stakeholders (consumers, creditors, and financial service investors). International financial institutions and other donors also plan to continue to give technical assistance to the NBU to ensure a smooth transfer of functions and the gradual introduction of new regulatory requirements for nonbank financial institutions.