Draft bill #9107 of March 15, 2023
Cosponsors: a group of MPs from Servant of the People and Holos factions
Who is affected: bank owners, creditors, businesses, deposit holders, the National Bank, and the State Property Fund.
Summary of the bill:
- no person who has been sanctioned by Ukraine, foreign states (except for the aggressor state), interstate associations, or international organizations will be allowed to buy or increase their significant share in Ukrainian banks (a significant share is a share of more than 10% of the bank’s authorized capital or shares)
- under martial law, if Ukraine, foreign states (except for the aggressor state), interstate associations, or international organizations apply sanctions against the bank or any of its significant shareholders and these sanctions pose a threat to the interests of deposit holders or other creditors of the bank, the National Bank will be obliged to take the following steps:
- revoke the banking license and liquidate the bank
- withdraw the bank from the market
- the only available mechanism to protect the rights of persons who suffered losses from the liquidation of the bank as a result of sanctions will be compensation for these losses at the expense of the state waging the war of aggression against Ukraine
- the Deposit Guarantee Fund will not reimburse funds that have been placed in the bank by a person under sanctions applied by Ukraine, a foreign state, an interstate association, or an international organization
- the procedure for withdrawing banks under sanctions from the market will be simplified. In particular, the Cabinet of Ministers will decide on whether the state will participate in the withdrawal of such a bank without the report from the Financial Stability Council confirming that there are signs of financial instability in the banking system.
What is right: persons under sanctions will have less leverage to influence the banking system of Ukraine.
What is wrong:
- it is not clear from the draft bill whether people and businesses will get their guaranteed compensation from the Deposit Guarantee Fund if a bank is liquidated. That is, the text can be interpreted in a way that if the bank is liquidated under the proposed procedure, no one will receive any compensation
- if adopted, the bill will have a negative impact on the banking system and contribute to legal uncertainty. People will have less trust in banks and invest less money in them fearing the possibility of sanctions against the bank or its owners. Ukraine applies sanctions unpredictably: they can be imposed against any enterprise. Therefore, no banks, except state banks, will be 100% safe
- after the bill is adopted and implemented, creditors that will suffer significant losses will sue Ukraine under international arbitration. These lawsuits will cost the government budget dearly
- actions proposed by the bill can be applied against a bank for any sanctions imposed by foreign states, interstate associations, or international organizations. That is, these sanctions can have nothing to do with the Russian aggression. Moreover, they may have no connection to Ukraine at all. The bill will endanger the banking system and guarantee legal uncertainty for bank owners and deposit holders.
Alternative solution: to clearly state whether deposit holders will get compensation if the bank is liquidated due to sanctions. Also, to define cases when the sanctions imposed by foreign states, interstate associations, and international organizations are applied in Ukraine. Current legislation on how sanctions are applied by Ukraine, in particular the grounds and justification of their application, has to be clarified in detail.
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