Law of Ukraine

“On the System of Guaranteeing Natural Person Deposits”

Date of entry into force:
September 21, 2012

The Law establishes the legal, financial and organizational principles for functioning of the system of guaranteeing natural person deposits, the authority of the Fund for Guaranteeing Natural Person Deposits (hereinafter referred to as “Fund”), and the procedure for the Fund’s payout on deposits. The Law also regulates relations between the Fund, banks, the National Bank of Ukraine, and determines the authority and functions of the Fund on removing insolvent banks from the market and liquidating banks.

Article 3 of the Law establishes the legal status of the Fund. Namely, it envisages that the Fund is an institution carrying out special functions in the sphere of guaranteeing natural person deposits and removing insolvent banks from the market. The Fund is a public legal entity, and has separate property that belongs to the state and is held by it on the right of economic management. The Fund is an economically independent institution, has its own balance, and a current and other accounts in the National Bank of Ukraine. The Fund is an institution that has no objective to generate profits. The location of the Fund is Kyiv. The bodies of state power and the National Bank of Ukraine have no right to interfere with the work of the Fund in its exercising of the functions and the authority vested in it by the legislation. The Fund interacts with the National Bank of Ukraine and other bodies of state power within the scope determined by the Law and other legislative acts. The managing bodies of the Fund are the administrative board and the executive directorate. The Fund is reorganized and liquidated on the basis of a separate law.

According to Article 4 of the Law, the main task of the Fund is ensuring the functioning of the system of guaranteeing natural person deposits and removing insolvent banks from the market. To fulfill its main task, the Fund carries out the following functions:
  • keeping the register of the Fund’s participants;
  • accumulating resources received from sources determined by Article 19 of the Law, monitoring the complete and timely transfer of fees by each participant of the Fund;
  • investing the Fund’s resources in Ukrainian government securities;
  • carrying out measures to organize payment of compensation on deposits, in case a decision is made to withdraw the banking license and liquidate the bank;
  • regulating participation of banks in the system of guaranteeing natural person deposits;
  • taking part in inspections of problem banks, by suggestion of the National Bank of Ukraine;
  • applying financial sanctions and administrative fines to banks and their management, respectively;
  • carrying out the procedure for removing insolvent banks from the market, including through temporary administration and liquidation of banks; organizing for disposal of assets and liabilities of an insolvent bank, sale of an insolvent bank, or creation and sale of a transitional bank (bank created in the process of removing an insolvent bank from the market, where the Fund is the nominal owner and administrator of shares, until the bank is sold to an investor);
  • inspecting banks regarding their adherence to the legislation on the system of guaranteeing natural person loans;
  • providing financial support to the assuming bank (a bank that is not classified as problem or insolvent, and which accepts assets and liabilities from an insolvent bank in the process of the latter being removed from the market);
  • forecasting potential expenses of the Fund related to removing insolvent banks from the market and paying out compensation to depositors.

Article 5 of the Law envisages that the Fund is accountable to the Cabinet of Ministers of Ukraine and the National Bank of Ukraine. The Fund’s accountability means:
  • that the Cabinet of Ministers delegates its representative to the administrative board of the Fund, and withdraws them;
  • that the National Bank of Ukraine delegates its representatives to the administrative board of the Fund, and withdraws them.
Before July 1 of the year following the reporting year, the Fund provides the Cabinet of Ministers of Ukraine and the National Bank of Ukraine with an annual report, together with the auditor opinion.

The Fund issues normative legal acts in the form of instructions, provisions and regulations (Article 6 of the Law).

According to Article 8 of the Law, the administrative board of the Fund consists of five persons – one representative of the Cabinet of Ministers of Ukraine, two representatives of the National Bank of Ukraine, one representative of the profile committee of the Verkhovna Rada of Ukraine, and the Managing Director of the Fund (by virtue of position). The term of appointment of a member of the Fund’s administrative board, except the Managing Director of the Fund, is four years, and can be extended, but no more than by one extra term.

Articles 9 and 10 of the Law determine the authority and working procedure of the administrative board of the Fund and the head of the Fund’s administrative board.

According to Article 11 of the Law, the executive directorate of the Fund manages the day-to-day operations of the Fund. The executive directorate of the Fund consists of five members. The Managing Director of the Fund and their deputies are included in the executive directorate of the Fund by virtue of their position. The authority of the executive directorate of the Fund is determined in Article 12 of the Law.

Article 13 of the Law envisages that the Managing Director of the Fund is appointed to the position and dismissed from it by the administrative board of the Fund, by majority vote. The Managing Director of the Fund is appointed to the post for a term of five years, with an option of one second term. The authority of the Managing Director of the Fund is established in Article 14 of the Law.

According to Article 15 of the Law, an internal audit service is created in the Fund, acting on the basis of the respective provision, approved by the administrative board of the Fund by suggestion of the executive directorate of the Fund. In its work, the internal audit service is accountable to the administrative board of the Fund. The head of the internal audit service is appointed and dismissed by the administrative board of the Fund. The internal audit service carries out the following functions:
  • carrying out periodic inspections of the Fund’s work in terms of adherence to the requirements of the legislation, normative legal acts of the Fund and decisions of the Fund’s management bodies;
  • checking the results of the financial and investment activity of the Fund;
  • carrying out other functions according to the provision on the internal audit service.

The legal status of the Fund employees is established by Article 16 of the Law.

The participants of the Fund are banks. Participation of banks in the Fund is mandatory. The specifics of a transitional bank’s participation in the Fund are determined by the Law and normative legal acts of the Fund. A bank acquires status of the Fund participant on the day of receiving its banking license (Article 17 of the Law).

According to Article 19 of the Law, the sources of the Fund’s resources are:
  • entry contributions of the Fund participants;
  • regular contributions of the Fund participant;
  • special contribution to the Fund;
  • income received from investing the Fund’s resources in Ukrainian government securities;
  • income received as interest accrued by the National Bank of Ukraine on the balance of the Fund’s accounts opened with the National Bank of Ukraine;
  • loans received from the National Bank of Ukraine;
  • forfeits (fines, penalties) collected according to the Law;
  • resources contributed by the National Bank of Ukraine on the day of the Fund’s creation, in the amount of UAH 20 million;
  • resources of the State Budget of Ukraine;
  • income on providing financial aid to an assuming bank;
  • charitable contributions, grants, technical aid, including from foreign entities;
  • resources received from carrying out measures envisaged by the debt arrangement plan, namely from sale of an insolvent bank, a transitional bank, or from bank liquidation.

The Fund is the sole administrator of resources accumulated in the process of its work (Article 20 of the Law). The resources of the Fund are not included into the State Budget of Ukraine, are not subject to seizure, and can be used by the Fund exclusively to:
  • pay the guaranteed compensation amount to depositors according to the Law;
  • cover expenses related to carrying out the functions and authority vested with the Fund, including to pay expenses related to the procedure of removing an insolvent bank from the market, within the cost estimate approved by the administrative board of the Fund;
  • provide for the day-to-day operation of the Fund, keep its staff, and develop its material and technical base, within the cost estimate approved by the administrative board of the Fund;
  • provide financial aid to the assuming banks;
  • grant loans to the Fund’s employees within the cost estimate approved by the administrative board of the Fund, and according to the procedure envisaged by the normative legal acts of the Fund;
  • provide a special-purpose loan for advance payment to a bank’s deposits during the time of temporary administration.

Articles 21-23 of the Law are dedicated to payment of the entry, regular and special contributions to the Fund.

The amount and procedure for paying the fine for non-payment or late payment of contributions to the Fund, and penalties for administrative offences, are determined in Article 24 of the Law.

According to Article 25 of the Law, in order to carry out its functions, the Fund has the right to receive loans from the Cabinet of Ministers of Ukraine, or to receive a non-refundable contribution of the state for the respective year, if the amount of the Fund’s usable resources decreased by more than 70% compared to the beginning of that year.

According to Article 26 of the Law, the Fund guarantees each bank depositor compensation of funds on their deposit. The Fund pays out compensation in the amount of the deposit, including the interest accrued as of the day when the National Bank of Ukraine makes the decision to categorize the bank as insolvent and the Fund initiates the procedure to remove the bank from the market, but not exceeding the amount established by the Fund’s administrative board as of the date of such decision, regardless of the amount of deposits in one bank. The Fund fulfills its obligations before the depositors while observing the requirement for minimal cost to the Fund and minimal losses of the depositors, in a manner determined by the Law, including by transferring the bank’s assets and liabilities to an assuming bank, selling the bank, creating a transitional bank for the term of temporary administration, or paying compensation to depositors after a decision is made to withdraw the banking license and liquidate the bank. The compensation is paid with regard to amounts paid to the depositor during the term of temporary administration of the bank. The Fund’s guarantees do not apply to compensation of deposits in cases provided for by the Law. The depositor acquires the right to receive the guaranteed compensation amount on their deposit at the expense of the Fund within the limit of compensation of deposits, after a decision is made to withdraw the banking license and liquidate the bank. The Fund guarantees compensation of amounts for a deposit that the depositor has with a bank subsequently reorganized by transformation, on the same conditions as before reorganization. The Fund does not compensate the following amounts:
  • given to the bank for fiduciary management;
  • on deposits under UAH 10;
  • on deposits confirmed by a savings (deposit) certificate to bearer;
  • deposited with the bank by a person who was a member of the supervisory board, the board of directors, or the revision committee of the bank, unless a year has passed between their dismissal from their position and the decision of the National Bank of Ukraine to categorize the bank as insolvent;
  • deposited with the bank by a person who provided professional services to the bank in the capacity of an auditor, legal advisor, or assessing entity, if such services directly contributed to the bank’s developing signs of insolvency, and the time between their provision of such services and the decision of the National Bank of Ukraine to categorize the bank as insolvent is less than one year;
  • deposited with the bank by a holder of a material interest in the bank;
  • deposited with the bank by a person who individually receives interest on contractual terms that are more favorable than standard ones, or enjoys other financial privileges with the bank;
  • on a bank deposit that is subject of pledge and ensures fulfilling the depositor’s obligations before the bank, within the scope of such obligation;
  • on deposits in branches of foreign banks.
Compensations for deposits in foreign currency are paid in the national currency of Ukraine after the deposit amount is converted according to the official rate of hryvnya against foreign currencies, as established by the National Bank of Ukraine on the day when the National Bank of Ukraine makes the decision to categorize the bank as insolvent and the Fund initiates the procedure to remove the bank from the market and introduces temporary administration.

The procedure for determining depositors that are entitled to compensation of deposits, as well as the procedure for settling accounts with depositors, are envisaged in Articles 27 and 28 of the Law.

Chapter VI of the Law provides for the regulatory activity of the Fund. For example, according to Article 30 of the Law, the Fund regulates the work of banks by:
  • within the scope of its authority, passing normative legal acts that are mandatory for banks;
  • monitoring adherence of banks to their obligations related to their participation in the system of guaranteeing natural person deposits;
  • removing insolvent banks from the market;
  • other means provided for by the Law.

Article 32 of the Law envisages the terms of inspection of banks by the Fund.

The administrative and economic sanctions applicable to banks for violation of the legislation of guaranteeing natural person deposits are established by Article 33 of the Law.

Chapter VII of the Law is dedicated to implementing temporary administration in a bank.

Liquidation of banks is regulated by Chapter VIII of the Law. According to Article 44 of the Law, the National Bank of Ukraine makes a decision to withdraw the banking license and liquidate a bank by suggestion of the Fund and for other reasons provided for by the Law of Ukraine “On Banks and Banking”. The Fund submits the proposal to withdraw the banking license and liquidate a bank to the National Bank of Ukraine in the following cases:
  • according to the debt arrangement plan;
  • at the end of the term of temporary administration and/or failure to carry out the debt arrangement plan;
  • in other cases provided for by the Law.

The National Bank of Ukraine must make a decision on withdrawing the banking license and liquidation of a bank within five days of receiving the Fund’s proposal on the bank liquidation. The National Bank of Ukraine informs the Fund on the decision to withdraw the banking license and liquidate the bank no later than on the day following the day of such decision. The Fund appoints the Fund’s authorized person and initiates the bank liquidation procedure on the day of receiving the decision of the National Bank of Ukraine to withdraw the banking license and liquidate the bank, except for cases when liquidation is carried out by initiative of the bank’s owners. Liquidation of the bank must be complete no later than one year after the decision to liquidate the bank was made. The Fund has the right to make a decision to extend the bank’s liquidation for a term of up to one year, and for high-street banks – up to two years.

Article 55 of the Law envisages that the Fund and the National Bank of Ukraine cooperate in order to ensure stability of the Ukrainian banking system and protect the interests of depositors and other creditors of banks. To this end, the Fund and the National Bank of Ukraine conclude a cooperation agreement that provides for principles of cooperation of these institutions in the process of regulating and overseeing the activity of banks, applying measures of influence to them, inspecting banks, and carrying out measures to remove insolvent banks from the market.

In case a bank fails to pay contributions to the Fund during one month after the payment day established by the Law, the Fund has the right to address the National Bank of Ukraine requesting undisputable debiting of contributions and the penalty amounts from the bank’s correspondence account (Article 58 of the Law).

The Law makes appropriate changes to the Code of Ukraine on Administrative Offences, the Economic Procedural Code of Ukraine, the Civil Procedural Code of Ukraine, the Criminal Code of Ukraine, the Code of Administrative Proceedings of Ukraine; the Laws of Ukraine “On Public Appeals”, “On the National Bank of Ukraine”, “On Restoring the Solvency of a Debtor or Declaring Them Bankrupt”, “On Banks and Banking”, “On Insurance”, “On Court Fee”, “On Personal Data Protection”, “On Government Procurement”; and the Decree of the Cabinet of Ministers of Ukraine “On State Fee”. The Law also declares invalid the law of Ukraine “On the Fund of Guaranteeing Natural Person Deposits” N 2740-III of September 20, 2001.
Внимание! Информация устарела из-за того, что этот раздел временно не обновляется!


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