Rada adopts law on splitting regulation of financial services

Ukraine’s parliament approved on Sept. 12 the
so-called “split” law aimed at re-distribution of regulation powers on the
market of financial services. The bill drew 296 votes, including the
mono-majority People’s Servant party, Voice party and the opposition European
Solidarity party.

The law envisages that starting July 1, 2020, the
National Commission on Regulating the Markets of Financial Services will be
liquidated and its functions will be split between the National Bank of Ukraine
and the National Security Commission. The bill aims to cut the number of regulatory
and controlling bodies on the market of non-banking financial services. The
National Security Commission is supposed to regulate and oversight the
non-state pension system, property management under construction and real
estate operations. The NBU will be in charge of licensing and regulating
non-banking financial services (including insurance, leasing, financial
companies, credit unions, pawn shops, and the bureaus of credit history). The
NBU’s oversight will include the regular assessment of non-banking financial
companies, including risk assessment. It is also to develop the rules for
reporting by such companies.

In related news, the NBU released an announcement on
the same day noting that this law will ensure a balanced and systemic approach
for the effective development of the non-banking financial sector and the
protection of consumer rights on the financial market. The NBU emphasized that
the adoption of the law on “split” was the key requirement of Ukraine’s
international financial institution.

Evgeniya Akhtyrko: The timing
of the bill’s passage was perfect as it coincided with the commencement of a two-week IMF mission to Ukraine. The
new political establishment intends to demonstrate its readiness for fast-paced
and effective cooperation with international financial institutions in order to
secure financing to deal with high repayments on foreign debt in upcoming
years. The inability of the previous political establishment to move forward
with the adoption of a “split” law was among stumbling blocks in cooperation
with the IMF

As for institutional changes, the newly adopted
bill significantly increases the role of the NBU on the financial market of
Ukraine. The new mandate isn’t easy. On the one hand, the regulator should
develop the new rules of the game in order to reach the ambitious goal of the
new administration on attracting a high flow of foreign investors. On the other
hand, these rules should ensure the transparency and stability of the financial
system, while lowering the risks of new financial crises in the future.