Reform launch was stimulated by signing of the EU-Ukraine Association Agreement. In June 2015, the Board of the National Bank of Ukraine adopted the complex program for the development of Ukraine’s financial sector until 2020. The adoption of this program made a real start of the banking system reform, which should recover the economy and create favorable competitive environment meeting the EU standards, restore people’s trust in national banks, renew lending, make non-cash transactions popular, accessible and safe.
In 2017, within the reform, the NBU should release the development strategy and the road map for harmonization of the banking regulation rules with the Basel Committee’s recommendations and the EU directives, and complete the development of the new liquidity ratio of banks according to the Basel III recommendations that will be implemented as early as 2018. The NBU also identified the top priority for all government authorities – to strengthen protection of financial services consumers. Thus, the necessary amendments should be taken, the effective judicial reform should be implemented, state-owned banks (SOBs) should be reformed.
Reform expert – Vitaliy Kravchuk, senior researcher at the Institute for Economic Research and Policy Consulting.
➤ performance of the stress tests, according to which it was necessary to bring capital of banks in line with the requirements of the NBU regulations.
➤ almost completed work on disclosure of bank owners.
Measures to be taken:
➤ At the beginning of this year, the Ministry of Finance approved the Strategy for the Development of State-owned Banks, according to which three largest financial institutions owned by the state should have own specialization and provide loans for the state-owned enterprises only in compliance with the NBU prudential requirements, particularly the concentration regulation.
➤ Transfer of the SOBs from support by state enterprises to lending market business and people within the identified target segments.
➤ Further development of the national payment system “Prostir” (eng. space).
➤ Development of electronic payment channels, including mobile payments.
➤ Further development of international payment systems.
➤ Development of E-money.
➤ Development of alternative non-banking payment systems.
➤ Raising the level of awareness of non-cash payments and financial literacy, removing fears.
➤ Motivation of users to use non-cash payments.
➤ Pension reform. A third part of the pension fund is subsidized from the state budget.
➤ Insurance reform. Insurance companies promised to implement the European Directive on Insurance Companies in 2018. To launch the insurance reform, it is necessary to decide who will govern the insurance market. It is planned to liquidate the National Commission for Regulation of Financial Services Markets and delegate the functions of regulating the insurance market to the National Securities and Stock Market Commission.
➤ Consumer loans. There is a higher level of loans than permitted for the related persons in many banks. This concerns particularly the banks that have Ukrainian owners. These banks are used as a source of financing owners’ businesses. Deadlines to reduce the level of loans for the related persons were set (within about three years). This will allow to move more banks out of the market.
➤ International operators of popular payment systems such as PayPal and Skrill need support to enter the Ukrainian market.
Key laws adopted under the reform:
➤ The Comprehensive Program of the Ukrainian Financial Sector Development Until 2020.
➤ The Amendments to Some Laws of Ukraine “On Liability of Banks Owners”.
➤ The Law “On the National Bank”.
➤ The first version of the Basel Recommendations.
Laws to be adopted:
➤ The Draft Law on Amendments to the Law of Ukraine “On the System of Guaranteeing Deposits of Natural Persons” (concerning prohibition on requesting additional documents).
➤ The Draft Law on Amendments to Some Laws of Ukraine “On Improvement of the Efficiency of Regulatory Activities of the National Bank of Ukraine”.
➤ The Draft Law on Amendments to Certain Legislative Acts of Ukraine “On Regulation of Money Transfer”.
➤ The Draft Law on Amendments to Some Laws of Ukraine “On Banks and Banking Activity”.
➤ The Draft Law on Amendments to the Law of Ukraine “On the National Bank of Ukraine”.
➤ The Draft Law on Amendments to Certain Legislative Acts of Ukraine “On Development of Institutional Capacity of the National Bank of Ukraine”.
➤ The Draft Law on Amendments to the Budget Code of Ukraine “On Development of Institutional Capacity of the National Bank of Ukraine”.
➤ The Draft Law on Amendments to Certain Legislative Acts of Ukraine “On Liabilities of Persons Related to the Bank”.
➤ The Draft Law on Amendments to Certain Legislative Acts of Ukraine “On the Terms of Returning Time Deposits”.
➤ The Draft Law On Amendments to the Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets concerning Information Disclosure”.
➤ The Draft Law “On Ukrainian National Development Bank”.