Draft Law of Ukraine

“On Amendment of the Law of Ukraine “On Banks and Banking”

The major goal of the initiated draft is to adjust current legislation governing operation of foreign banks’ branches in Ukraine, according to the legislation of EU, Basel Committee Core Principles for Effective Banking Supervision, and to comply with the requirements outlined in the Partnership and Cooperation Agreement, dated June 14, 1994.

This draft determines that branches of foreign banks shall have the right to engage in banking only upon issuance of the relevant license. The right to establish branches in Ukraine shall have the banks of those foreign countries that collaborate in the area of counteraction against laundering of criminal money, co-operate with FATF, and those, with which Ukraine has signed international agreements on rendering legal assistance, providing that decisions of Ukrainian courts are to be recognized and enforced, and on co-operation in the area of bank supervision.

This draft stipulates basic requirements for establishing branches of foreign banks and their registration. Bank license will be issued to a branch of a foreign bank in line with the procedure established according to the legal normative acts of the National Bank of Ukraine. Deposits made by natural persons with a branch of a foreign bank will be guaranteed, in accordance with the procedure and amounts determined by Ukrainian legislation. National Bank of Ukraine shall have the right to revoke license issued to a foreign bank’s branch.

The draft also outlines legal grounds for liquidating branches of foreign banks. Foreign bank’s branch may be liquidated on the initiative of:

• [headquarters of] the respective foreign bank;
• National Bank of Ukraine;
• supervisory body of a foreign country if the bank license, issued to its resident bank that operates its branch in Ukraine, has been revoked.

Adoption of the above draft law will allow to update banking legislation, to resolve problematic issues associated with practical application of the law of Ukraine “On Banks and Banking”, and will facilitate Ukraine’s accession to WTO.