NBU to impose sanctions on the banks lacking transparent ownership structure

Asters, Kyiv, Ukraine
Thursday, May 28, 2015

By its Resolutions Nos. 328 ("Resolution No. 328") and 332 ("Resolution No. 332"), both dated 21 May 2015, effective as of 23 May 2015, the National Bank of Ukraine (the "NBU") introduced the criteria of transparency of bank ownership structure, the obligations of the bank and its shareholders to disclose the relevant details and sanctions to be imposed on the bank for the failure to comply with the aforementioned requirements of the NBU.

According to Resolution No. 328, bank ownership structure shall be deemed transparent if all the following criteria are met:

• Information on bank ownership structure allows to identify: all persons having direct or indirect substantial interest (as defined in the Law of Ukraine "On banks and banking activity") in the bank or capable of exercising substantial or decisive influence on bank management or operation; all the key participants (ibid.) in the bank and all the key participants in the legal entities comprising bank's ownership chain; the nature of interconnection between the aforementioned persons;
• Documents regarding the bank ownership structure are in line with the requirements of Resolution No. 328;
• Information regarding the bank ownership structure has been submitted to the NBU and published on bank's website (in a separate directory titled "Bank ownership structure") and the NBU website.

The bank ownership structure shall be deemed non-transparent if it is based on trust ownership preventing identification of all the owners of substantial interest in the bank.

Resolution No. 328 authorizes the NBU to require information and the documents evidencing the bank ownership structure from the bank, the owners of substantial interest and all the key participants in the bank. The NBU shall offer to the bank, which ownership structure lacks transparency, to align it with the applicable rules within the term prescribed by the NBU. In case of bank's failure to comply with the transparency criteria, the NBU shall declare such bank's ownership structure non-transparent informing the bank accordingly.

The bank shall submit to the NBU the documents evidencing its ownership structure as of January 1 on the annual basis by February 1, as well as update the NBU within 10 business days after the date any changes have occurred in:

• The list of substantial interest owners and the amount of the interest they hold; or
• The list of 10 major key participants or the amount of their participation, provided that the changes in the participation amounts exceed 1 percent of the charter capital.

As a primary measure, each bank shall provide an electronic and a hard-copy report on its ownership structure, as well as the relevant descriptive scheme, to the NBU within 2 weeks after the effective date of Resolution No. 328. The disclosed ownership structure shall be as of 8 March 2015 and the date of disclosure. The owners of substantial interest and the key participants in the bank shall disclose their details to the bank within a week after the effective date of Resolution No. 328.

According to Resolution No. 332, the NBU can impose the following sanctions on the banks for their failure to disclose the ownership structure in accordance with the requirements of Resolution No. 328:

• Declaring the bank troubled;
• Rejecting the refinancing of the bank;
• Refusing to grant a general foreign exchange license to the bank.

For further information please contact Asters' partner Iryna Pokanay
and counsel Gabriel Aslanian.