NBU obliges banks to provide monthly reports on their affiliated persons

Asters, Kyiv, Ukraine
Tuesday, May 19, 2015

By its Resolution No. 315 (the "Resolution"), dated 12 May 2015 (effective as of 15 May 2015), the National Bank of Ukraine (the "NBU") introduced new rules of determining the affiliated persons of the banks. The Resolution constitutes a part of a greater package of legislation aiming at increasing the liability of the owners of commercial banks. The first step came on 2 March 2015 with the law extending the liability for violation of the banking laws and regulations of the NBU (including, inter alia, violations resulting in declaring a bank troubled) and wilful conduct resulting in declaring a bank insolvent to all the affiliated persons of a bank.

Under the Resolution, each bank is required to set up a list of its affiliated entities to be ratified by its management board. Such list should be submitted to the NBU and updated on a monthly basis (by the 10th day following the reporting period) in accordance with the form to be established by a resolution of the NBU. The decision as to whether a legal entity or an individual is affiliated to the bank can also be taken by an authorized officer of the NBU and notified to the bank electronically not later than the following business day. A person shall be deemed affiliated to the bank unless the bank can prove otherwise within 15 business days upon receipt of the relevant NBU notice. According to the Resolution, the NBU is entitled to require documents providing for the details needed to identify individuals and legal entities as affiliated persons of a bank.

The Resolution introduces a set of criteria for identifying the individuals and legal entities affiliated to the bank, including the nature of affiliation (exclusivity, economic dependence, common infrastructure, lack of transparency) and transaction parameters (purpose of transaction, documentation (lack of documents, misleading documents), operational standards, indebtedness and creditworthiness, internal control tools, interest rates, fees and charges, collateral and guarantees).

The state (represented by the relevant state body or entities, which are fully owned by the state or in which the state ownership exceeds 50 percent, or constitutes an amount sufficient to exercise a decisive influence on such entities' decision-making), a local community (represented by the local self-government body) and an international financial institution having a cooperation agreement with the Ukrainian Government and enjoying privileges and immunities under the laws of Ukraine shall not be deemed affiliated persons of the banks. 

As an interim measure, the Resolution requires that all banks submit, by 29 May 2015, electronically (in the Excel format) the lists of their affiliated persons as of 1 May 2015. Such lists should be updated by the banks electronically (in the Excel format) on a monthly basis (not later than the 10th day after the reporting period) until the respective new statistical reporting forms are introduced by the NBU.