Kyiv, July 13, 2015. The Deposit Guarantee Fund for Individuals is to get broader powers in order to accelerate the cleaning out of the banking system and support its stabilization, believes Andriy Olenchyk, Deputy Managing Director of the Deposit Guarantee Fund for Individuals. He expressed his opinion during press a briefing at Ukraine Crisis Media Center as a part of Ukraine Reforms Communications Taskforce.
“There are fifty five banks in the Fund’s portfolio, forty four of them are undergoing the process of liquidation and the provisional administration is working in eleven banks. Fifty-three institutions were withdrawn in 2014-2015, involving hundreds of thousands of depositors and assets exceeding 320 billion hryvnia. We have never faced anything like this before, thus there were a number of issues calling for immediate legislative solution. These issues were reflected in a bill that we expect to be passed by the Verkhovna Rada by July 17, so that the Deposit Guarantee Fund is able to perform its functions efficiently,” said Andriy Olenchyk.
What is meant here is that the bill, “On making changes to Ukrainian legislative acts to improve the deposit guarantee fund for individuals and withdraw insolvent banks from the market (No.2045а dated June 08, 2015),” which considerably increases the powers of the Fund for managing the property of liquidated banks, exerting legal pressure upon owners of such institutions. It also increases the Fund’s mobility on making payments to depositors.
The intended innovations are as follows: 1) a reduction of the period of temporary banking administration from 120 to 60 days 2) the opening of a consolidated office for working with the assets of liquidated banks which consequently should raise the efficiency of sale of property thereby increasing the possibility of deposits payoff to depositors in the 4-7th round, 3) the intensification of proprietor’s liability for associated persons (owners, management) including not only the Fund, but the affected customers directly, meaning that both individuals and legal entities will be able to enter legal action with the passing of the bill, 4) accelerating the deadline for initiating payoffs as well as introducing new technical solutions aimed at a considerable expansion of the group of financial institutions authorized to pay off deposits to the affected depositors, 5) and expanding state guarantees for repayment of funds to private entrepreneurs within the 200,000 hryvnia limit.
“It is a revolutionary law indeed, taking the system of deposit guarantee to a new level. The law has been developed with due regard to the best international practices, involving experts from the World Bank and the US Treasury Department. Moreover, it is a prerequisite to receive the second tranche of Ukraine’s program system loan from the World Bank for financial sector development,” said Olenchyk.
Taras Kachka, head of Ukraine Reforms Communications Taskforce, added that the approval of draft bill No. 2045а is a part of the financial sector reformation program. It has been approved by the National Reforms Council and is a result of fruitful cooperation with international institutions. It is also an example of common understanding between various bodies of power in Ukraine, in particular the Ministry of Finance of Ukraine, the National Bank and the Deposit Guarantee Fund for Individuals.