Publication date: 15.07.2024
The role of the National Bank of Ukraine in regulating banking activities
Introduction
The National Bank of Ukraine (NBU) is the central bank of Ukraine and plays a key role in regulating banking activities. Its main functions include the development and implementation of monetary policy, ensuring the stability of the financial system, and banking supervision and regulation. In this article, we will look at the main functions and tasks of the NBU, its role in regulating banking activities, as well as the legal framework and mechanisms of regulation.
Legal framework
The Constitution of Ukraine
The Constitution of Ukraine sets out the basic principles of the NBU's activities, including the independence of the central bank and its functions to ensure the stability of the national currency.
Law of Ukraine "On the National Bank of Ukraine"
This law defines the legal status, tasks, functions and powers of the NBU. The law establishes the basic principles of the NBU's operations, the procedure for the appointment and dismissal of its governors, and the mechanisms for interaction with other government agencies and financial institutions.
Law of Ukraine On Banks and Banking Activities
This law regulates the activities of banks in Ukraine, including licensing, banking operations, capital and reserve requirements, as well as supervision and control by the NBU.
Main functions and tasks of the NBU
Monetary policy
The NBU develops and implements monetary policy to ensure the stability of the national currency, maintain low inflation, and promote economic growth. The main instruments of the NBU's monetary policy are as follows:
- The key policyrate: setting the interest rate at which the NBU grants loans to commercial banks.
- Open market operations: purchase and sale of securities to regulate the money supply.
- Reserverequirements: setting reserve requirements for commercial banks.
Foreign exchange policy
The NBU regulates the foreign exchange market in order to maintain the stability of the national currency. This includes:
- Setting the official hryvnia exchange rate against foreign currencies.
- Control over foreign exchange transactions: regulation of foreign currency purchase, sale and exchange transactions.
- Management of foreign exchange reserves: accumulation and management of the country's foreign exchange reserves.
Banking supervision and regulation
The NBU supervises the activities of banks to ensure their stability, solvency and compliance with the law. The main tasks of banking supervision include:
- Licensing of banks: issuing licences to conduct banking activities and monitoring compliance with licence requirements.
- Regulation of capital and reserves: setting minimum capital and reserve requirements for banks.
- Risk control: monitoring and assessment of risks associated with the activities of banks, including credit, market, operational and other risks.
- Inspections: conducting inspections of banks for compliance with regulatory requirements and assessing their financial condition.
Payment systems
The NBU regulates and supervises the functioning of payment systems in Ukraine, ensuring their reliability, efficiency, and security. This includes:
- Licensing of payment systems: issuing licences for payment systems and monitoring compliance with licence requirements.
- Regulation of payment instruments: setting requirements for payment instruments, including bank cards, electronic money and other means of payment.
- Monitoring and control: monitoring the activities of payment systems and conducting inspections for compliance with regulatory requirements.
Protection of financial services consumers
The NBU takes measures to protect the rights of financial services consumers, including:
- Reviewingcomplaints and appeals: reviewing consumer complaints about the actions of banks and other financial institutions, conducting inspections, and taking enforcement actions.
- Informing consumers: providing consumers with information on their rights, terms and conditions of financial services, and mechanisms for protecting their rights.
- Development of regulations: development and implementation of regulations aimed at protecting the rights of financial services consumers.
Regulatory and supervisory mechanisms
Licensing of banks
The NBU licenses banks and other financial institutions, setting requirements for capital, ownership structure, managerial qualifications and other aspects of their operations. Licences are granted on the basis of the applicant's compliance with the requirements.
Regulation of capital and reserves
The NBU sets minimum capital and reserve requirements for banks to ensure their financial stability and solvency. Banks are required to maintain capital and reserves at the level required by the NBU.
Risk monitoring and assessment
The NBU monitors and assesses the risks associated with the banks' activities, including credit, market, operational and other risks. This includes analysing financial statements, conducting inspections, and assessing risks.
Inspections
The NBU conducts on-site inspections of banks to assess their financial stability, compliance with regulatory requirements, and identify possible violations. Based on the results of the inspections, enforcement actions may be taken, including fines, restrictions on activities or revocation of licences.
Application of enforcement actions
In case of violations, the NBU has the right to apply enforcement actions to banks, including fines, restrictions on activities, revocation of licences, appointment of a temporary administration, etc.
Conclusion
The National Bank of Ukraine plays a key role in regulating banking activities, ensuring the stability of the financial system, protection of the rights of financial services consumers and efficient functioning of payment systems. Its main functions include the development and implementation of monetary policy, banking supervision, regulation of capital and reserves, monitoring and assessment of risks, conducting inspections and applying enforcement measures. Compliance by banks with the NBU's requirements helps to ensure the stability and reliability of the Ukrainian financial system.
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