The Law of Ukraine

On Financial Services and State Regulation of Financial Service Markets

Date of Entry into Force:
August 22, 2002

The Law sets forth general legal principles in the sphere of rendering financial services, performing regulatory and supervisory functions with respect to the activity on providing financial services.

According to the Law, financial services are transactions with financial assets performed in the interest of the third persons at one's own expense or at their own expense, and in cases envisaged by the legislation - at the expense of earlier attracted financial assets of other persons for the purpose of obtaining profits or preserving the real value of financial assets.

According to the Law, financial institutions are:
  • banks;
  • credit unions;
  • pawn-shops;
  • leasing companies;
  • trust associations;
  • insurance companies;
  • institutions for accumulative pension security;
  • investment funds and companies;
  • other legal entities, whose exclusive type of activity is the provision of financial services.

Financial services are:
  • release of payment documents, payment cards, traveling checks and/or their servicing, clearing, other forms of securing settlements;
  • trust management of financial assets;
  • currency exchange activity;
  • attraction of financial assets with an obligation of their subsequent return;
  • financial leasing;
  • lending of funds, including under the conditions of a financial loan;
  • provision of guarantees and warranties;
  • money transfer;
  • services in the sphere of insurance and accumulative pension security;
  • trade with securities;
  • factoring;
  • other transactions meeting the requirements of financial services.

Article 18 of the Law determines the conditions for preventing legalization (laundering) of illegal incomes. While rendering financial services, financial institutions are prohibited from entering any contractual relations with anonymous persons, opening and maintaining anonymous (numbered) accounts. Financial institutions are prohibited from entering contractual relations with clients - legal entities or natural persons - in case there are doubts that the person is really acting on their own behalf.

State regulation of the activity on rendering financial services is performed by way of:
  • keeping state registers of financial institutions and licensing activities on rendering financial services;
  • ensuring normative and legal regulation of the activities of financial institutions;
  • supervising over the activities of financial institutions;
  • applying measures of influence by the authorized state bodies;
  • undertaking other measures on state regulation of financial services markets.

State regulation of financial services markets is performed by:
  • the National Bank of Ukraine;
  • the State Commission for Securities and Stock Market;
  • specially authorized body of executive power in the sphere of regulating financial services markets.

Chapter V of the Law defines organization, authorities and procedure for activities of the specially authorized body of executive power in the sphere of regulating financial services markets.

Within the limits of its competence, the authorized body shall issue licenses for financial institutions to:
  • perform insurance activities;
  • perform activities for rendering services on accumulative pension security;
  • provide financial loans at the expense of attracted funds;
  • perform activities for rendering any financial services that envisage direct or indirect attraction of financial assets from natural persons.

In case of violating normative and legal acts that regulate the activities on rendering financial services, the authorized body shall apply the following influence measures:
- force the violator to take measures for eliminating the violation;
- request that a special meeting of the financial institution participants be convened;
- impose fines;       
- temporarily terminate or cancel the license for the right to perform activities on rendering financial services;
- discharge the management from governing the financial institution and appoint a temporary administration;
- approve the plan for restoring financial stability of the financial institution;
- launch the issue on the liquidation of a financial institution.
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