Friday, March 27, 2015

The Law of Ukraine “On Banks and Banking”

Section I. GENERAL PROVISIONS

Chapter 1. GENERAL PROVISIONS

Article 1. Subject and Purpose of the Law

This Law defines the structure of the banking system, economic, organizational and legal fundamentals for establishment, operation, reorganization and liquidation (resolution) of banks. The purpose of this Law is to provide legal support for stable development and operation of banks in Ukraine in order to create an appropriate competitive environment in the financial market, protect legitimate interests of bank depositors and clients, introduce favorable conditions for the development of the economy of Ukraine, and support the domestic commodity producers.

Article 2. Definitions

The terms used in this Law shall have the following meaning:

“Associated person” shall mean the husband or wife, lineal relatives of this person (father, mother, children, siblings, grandfather, grandmother, grandchildren), lineal relatives of this person’s husband or wife, the husband or wife of a lineal relative.

“Affiliate of a bank” shall mean any legal entity in which the bank holds qualifying holding or which holds a qualifying share in the bank. ”Bank” shall mean a legal entity, that has an exclusive right, under the National Bank of Ukraine license, to render the banking services, the data on which have been entered into the State Register of Banks.

“Bank with foreign capital” shall mean a bank where the share of capital, owned by at least one foreign investor is not less than 10 percent.

“Banking group” - shall mean a group of legal entities comprising: a parent bank and its Ukrainian and foreign subsidiaries and/or associates that are financial institutions; two or more financial institutions where banking is the predominant activity. The bank holding company and the company that renders supporting services having common controller with the banking group participants shall form a part of the banking group. Banking shall be deemed the prevailing activity of the group, if the cumulative arithmetic average of assets of the banks (bank), being members (member) of the banking group, for the last four reporting quarters is equal to or exceeds 50% of the cumulative value of the arithmetic average values of assets of all financial institutions comprising the group for the same period. Calculation with regard to the predominant activity of the banking group shall be carried out every year as of January 1 according to the procedure prescribed by this Article. Should, after the group is determined the banking one on the basis of its prevailing activity, the share of cumulative assets of the banks (bank) within the cumulative size of assets of the financial institutions being members of this group have decreased and come to 40-50 %%, such a group shall be deemed the banking group during at least three years from the moment of such a decrease;

“Bank holding company” shall mean a financial holding company, in which banking is the predominant activity of the financial institutions being its subsidiary or associate companies.

“Banking activity” shall mean deposit-taking activity in respect of the funds of individuals and legal entities and allocation of these funds on the bank’s own behalf, terms, and at its own risk, opening and servicing accounts of individuals and legal entities.

“Bank credit” shall mean any obligation of a bank to extend a certain amount of money, any guarantee, any obligation to acquire the right to claim debt, or any extension of the debt maturity, which occurs in exchange for the borrower’s commitment to repay the debt amount, as well as an obligation to pay interest and other charges due on this amount.

“Banking license” shall mean a document issued by the National Bank of Ukraine in accordance with the procedure and subject to the conditions specified hereunder, that grants banks and branches of foreign banks the right to carry out banking activity.


“Banking payment instrument” shall mean an instrument containing the details identifying its issuer, the payment system, in which it is used and, as a rule, its holder. Relevant documents are formed with the help of banking payment instruments for the transactions performed using the banking payment instruments, on the basis whereof funds are transferred or other services rendered to the holders of such instruments.

“Bank accounts” shall mean the accounts which show bank’s own funds, claims, commitments of a bank in relation to its clients and counterparties, and which enable transfer of the funds by using the banking payment instruments. 

“State Register of Banks" shall mean the register maintained by the National Bank of Ukraine which contains information about state registration of all banks. 

“Subsidiary” shall mean a legal entity, controlled by another legal entity (parent company).

“Deposit” shall mean the funds in cash or a non-cash form in the currency of Ukraine or a foreign currency which are placed by clients into their personal accounts with a bank according to an agreement with the bank for a specified period of time or without specification of such a period of time, and which are subject to repayment to the depositor under the laws and regulations of Ukraine and terms and conditions of the agreement.

“Business reputation” shall mean the information collected by the National Bank of Ukraine regarding compliance of a legal entity or an individual’s activities, including those of the managers of the legal entity or holders of the qualifying shares therein, with the requirements of law, business practices and professional ethics, as well as the data on integrity, professional and managerial skills of the individuals.

“Economic ratios” shall mean the indicators, established by the National Bank of Ukraine, being mandatory for all banks.

“Foreign” shall refer to a citizen or a legal entity of any country other than Ukraine.

“Bank inspection” shall mean a form of banking supervision effectuation by the persons authorized by the National Bank of Ukraine directly at the bank premises.

“Qualifying holding” shall mean direct and/or indirect, independent or joint holding of 10 or more percent of the authorized capital or the voting rights granted by purchased shares (stakes) of a legal entity or the ability to exert decisive influence on the management or activities of the legal entity irrespective of the formal ownership.

“Capital of a bank” shall mean the capital base, i.e. the residual value of the bank assets after deduction of all its liabilities.

“Assigned capital” shall mean an amount of money in a freely convertible currency granted by a foreign bank to its branch for accreditation thereof.

“Authorized capital” shall mean paid-in money contributions of bank participants in the value of shares (stakes) of the bank in an amount determined by the bylaws of the bank.

“Regulatory capital” shall mean an aggregate of the core and additional capital whose components are defined by this Law and regulations of the National Bank of Ukraine.

“Legal entity managers” (other than a bank) shall mean managers of an enterprise or institution, members of the executive body and (supervisory) council of the legal entity.


“Client of a bank” shall mean any individual or legal entity that uses services of a bank. 

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