Publication date: 15.07.2024
Legal regulation of banking activities in Ukraine
Introduction
Banking is an important segment of the financial system of Ukraine, which ensures the stability of the economy and contributes to its development. Legal regulation of banking activities in Ukraine includes a set of regulations that establish the procedure for establishment, operation and liquidation of banks, as well as regulate their relations with clients. In this article, we will review the main aspects of the legal regulation of banking activities in Ukraine, including key regulations and principles of bank operations.
Key legal acts
The Constitution of Ukraine
The Constitution of Ukraine sets out the basic principles of the country's economic system, including the right to entrepreneurship, freedom of economic competition and protection of the rights of consumers of financial services.
Law of Ukraine On Banks and Banking Activities
The Law of Ukraine "On Banks and Banking Activities" is the main legal act regulating banking activities. This law defines:
- The legal status of banks;
- The procedure for establishment, registration, operation and liquidation of banks;
- Requirements to bank capital and reserves;
- Rules of banking supervision and control.
Law of Ukraine "On the National Bank of Ukraine"
This law regulates the activities of the country's central bank, the National Bank of Ukraine (NBU), which carries out state regulation and supervision of the banking system. The NBU's functions include:
- Issuing the national currency;
- Ensuring the stability of the banking system;
- Developing and implementing monetary policy;
- Granting licences to banks and other financial institutions;
- Conducting banking supervision.
Law of Ukraine "On Payment Systems and Money Transfers in Ukraine"
This law regulates the operation of payment systems, the procedure for making money transfers, sets requirements for participants in payment systems and the procedure for their registration. The Law also defines the rights and obligations of payment system participants and establishes mechanisms for protecting the rights of consumers of payment services.
Law of Ukraine "On Financial Services and State Regulation of Financial Services Markets"
This law establishes the legal framework for state regulation of financial services markets, including banking. It defines the procedure for the provision of financial services, the rights and obligations of financial institutions, and the mechanisms for protecting the rights of financial services consumers.
By-laws and regulations of the NBU
The NBU issues bylaws and regulations governing specific aspects of banking activities. These may include instructions, resolutions, regulations, letters, etc. They set out requirements for licensing, provisioning, reporting, risk management, foreign exchange transactions and other matters.
Basic principles of banking activities
Legality
Banking activities are carried out in accordance with the laws of Ukraine and regulations of the NBU. Banks are obliged to comply with all requirements established by law, including licensing, reporting, provisioning and other regulations.
Stability
Ensuring the stability of the banking system is one of the main objectives of state regulation. The NBU supervises banks, monitors their liquidity and solvency, and sets capital and reserve requirements.
Transparency.
Banks are required to provide complete and accurate information about their operations, financial position, and terms of service. This ensures the confidence of customers and investors in the banking system, and contributes to its efficiency and stability.
Competition
Ensuring equal conditions for competition in the banking services market helps to improve the quality and accessibility of financial services, stimulates innovation and reduces the cost of customer service.
Consumer protection
Ukrainian legislation establishes mechanisms to protect the rights of consumers of banking services. This includes the right to information, protection against unfair practices, the right to complaints and claims, and the right to protection of confidential information.
Regulation of banking activities
Licensing.
To conduct banking activities, banks must obtain a licence from the NBU. The licensing process involves verification of the bank's compliance with the legal requirements regarding capital, management structure, qualified personnel and other aspects. The licence may be cancelled in case of violation of the requirements of the law or the NBU regulations.
Banking supervision
The NBU continuously supervises the activities of banks to ensure their stability and reliability. Banking supervision includes:
- Analysing the financial position of banks;
- Monitoring compliance with liquidity and solvency ratios;
- Review of reporting and internal procedures;
- Conducting inspections;
- Taking enforcement action in case of violation of legal requirements by the bank.
Provisions.
Banks are required to create provisions to cover possible losses on loans and other assets. The NBU sets provisioning ratios and monitors compliance with them. This helps to reduce the risks of banking activities and ensures the financial stability of banks.
Capital requirements
The NBU sets minimum requirements for banks' authorised capital, which ensures their solvency and stability. Banks are required to maintain capital at a level that meets the requirements of the law and the NBU's regulations.
Internal control and risk management
Banks are required to implement internal control and risk management systems that ensure the reliability of their operations. This includes:
- Internal audit;
- Management of credit, market, operational and other risks;
- Implementation of measures to prevent fraud and money laundering;
- Reporting and risk analysis.
Protection of the rights of consumers of banking services
The right to information
Consumers of banking services have the right to receive complete, accurate and timely information on the terms and conditions of services, tariffs, rights and obligations of the parties. Banks are obliged to provide this information in a clear and accessible form.
Protection against unfair practices
Ukrainian legislation prohibits banks from using unfair practices in their relations with customers, including deception, misrepresentation, and unfair contractual terms. Consumers have the right to be protected from such practices and may bring complaints to the NBU, the Antimonopoly Committee of Ukraine or the courts in the event of a violation.
Protection of confidential information
Banks are obliged to ensure confidentiality of information on customer accounts and transactions. Banking secrecy may be disclosed only in cases provided for by law. Consumers have the right to protect their personal data and may demand that banks comply with the relevant laws.
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