Analysis of the Draft Law:
Analysis of the Draft Law of Ukraine “On Amendments to the Law of Ukraine “On the System of Guaranteeing Deposits of Individuals”
Essence of the project: This draft law introduces amendments to the Law of Ukraine “On the System of Guaranteeing Deposits of Individuals”, aimed at improving the powers of the governing bodies of the Deposit Guarantee Fund for Individuals (DGF). The changes concern the procedure for approving the report on the execution of the Fund’s cost estimate, the performance of the audit committee function by the administrative council of the Fund, and the terms for submitting a proposal to revoke the license and liquidate the bank.
Structure of the project: The draft law consists of two articles. The first article introduces changes to various articles of the Law “On the System of Guaranteeing Deposits of Individuals”, namely articles 9, 12, 18 and 44. The second article determines the date of entry into force of this law.
Main changes:
- Article 9: The Administrative Council of the Fund receives a new authority – to approve the report on the execution of the Fund’s cost estimate. Also, the administrative council is assigned the function of the audit committee. The requirement for annual reporting is excluded.
- Article 12: The Executive Directorate of the Fund prepares a draft report on the execution of the Fund’s cost estimate and submits it to the administrative council for approval. The requirement for annual reporting is excluded. The Administrative Council of the Fund approves the report on the execution of the Fund’s cost estimate for the implementation of temporary administration and/or liquidation of the bank.
- Article 18: The report on the execution of the Fund’s cost estimate for the implementation of temporary administration and/or liquidation of the bank is added to the reporting of the executive directorate.
- Article 44: The terms for the Fund to submit a proposal to the NBU to revoke the banking license and liquidate the bank in case of withdrawal of an insolvent bank from the market in certain ways are specified.
Key provisions important to stakeholders:
- For legislators: The draft law is important because it improves the management system of the DGF, in particular, it makes clearer the procedures for approving financial statements and the distribution of powers between the management bodies of the Fund.
- For experts: The change regarding the assignment of the functions of the audit committee to the administrative council is important, which potentially affects the transparency and effectiveness of control over the Fund’s financial activities.
- For business and banks: Changes in the part of the terms for submitting a proposal to revoke the license and liquidate the bank may affect the speed and predictability of the procedures for withdrawing insolvent banks from the market.
- For citizens (depositors): Changes aimed at improving the efficiency of the DGF potentially contribute to the stability of the deposit guarantee system and the protection of the interests of depositors.
Analysis of the Explanatory Note:
Analysis of the Draft Law of Ukraine “On Amendments to the Law of Ukraine “On the System of Guaranteeing Deposits of Individuals””
Essence of the draft law: The draft law is aimed at improving the activities of the Deposit Guarantee Fund for Individuals (DGF) by clarifying the powers of its governing bodies and expanding information transparency regarding the activities of the Fund and insolvent banks.
Reasons and necessity for adopting the draft law: According to the authors of the explanatory note, the need to adopt the draft law is due to the recommendations of the Accounting Chamber of Ukraine. These recommendations relate to the distribution of powers between the executive directorate and the administrative council of the Fund regarding financial reporting and auditing, as well as the need for clearer terms for submitting proposals to the NBU regarding the liquidation of insolvent banks. The aim is also to bring the activities of the DGF into compliance with the requirements of legislation regarding large enterprises, in particular, regarding the creation of an audit committee or assigning its functions to the supervisory board.
Main consequences of the draft law:
- For legislators: It is important for legislators to understand that the changes are aimed at increasing the efficiency and transparency of the DGF’s activities, which is critical to the stability of Ukraine’s financial system. Clarifying the powers between the management bodies of the Fund and establishing clear deadlines for the liquidation of banks should contribute to a more rapid response to crisis situations.
- For experts: Experts should pay attention to how the proposed changes will affect the Fund’s reporting and audit. It is important to analyze whether the powers of the audit committee are clearly defined enough and whether they will ensure independent control over the Fund’s financial activities. It is also important to analyze the terms of liquidation of banks to assess whether they will lead to undue pressure on the Fund.
- For business: For the banking system, changes may mean greater transparency and predictability of the Fund’s actions in cases of insolvency. On the other hand, the establishment of terms for liquidation may force banks to more carefully monitor their financial stability in order to avoid rapid liquidation in case of problems.
- For citizens: Ordinary citizens will receive greater transparency regarding the activities of the Fund and insolvent banks. Publication of the report on the execution of the Fund’s cost estimate for the implementation of temporary administration and/or liquidation of the bank will allow citizens to better understand where the funds allocated for deposit guarantee are going. Also, clearer terms for the liquidation of banks may contribute to a faster receipt of compensation to depositors.
Analysis of other documents:
Hello! Let’s analyze these documents regarding the draft law on amendments to the Law “On the System of Guaranteeing Deposits of Individuals”.
1. Position of the authors:
Both documents indicate support for the draft law. The Cabinet of Ministers of Ukraine submits the draft Law for consideration by the Verkhovna Rada, which clearly demonstrates their interest in its adoption. The draft Resolution of the Verkhovna Rada of Ukraine proposes to adopt the draft law as a basis, which is also support.
2. Main provisions of the documents:
- Submission of the draft law: The Cabinet of Ministers of Ukraine initiates amendments to the Law “On the System of Guaranteeing Deposits of Individuals” (regarding the improvement of the powers of the governing bodies of the Deposit Guarantee Fund for Individuals). This means that the government considers it necessary to review and improve the existing deposit guarantee mechanism.
- Representative in the Verkhovna Rada: Minister of Finance Serhiy Marchenko will represent the draft law in the Verkhovna Rada. This is important because he will be the one to answer questions from deputies and justify the need for the law.
- Draft Resolution of the Verkhovna Rada: It is proposed to adopt the draft law as a basis. This is the first step towards its final approval. It is important that the relevant Committee (on Finance, Taxation and Customs Policy) should finalize the draft law, taking into account comments and suggestions.
- Finalization of the draft law: The VRU Committee must take into account the comments and suggestions of the subjects of the right of legislative initiative. This means that the draft law may be amended and improved before the second reading.
Importance for different groups:
- For legislators: It is necessary to carefully analyze the proposed changes, assess their impact on financial stability and the protection of depositors. It is also important to take into account the opinion of experts and stakeholders.
- For experts: Involvement in the process of finalizing the draft law is critical. Their knowledge and experience will help identify potential risks and shortcomings of the proposed changes.
- For business (banks): Changes may affect the activities of banks, their obligations to the Deposit Guarantee Fund and customers. It is important to understand how these changes will affect the competitiveness and financial stability of the banking system.
- For citizens: Changes may improve the protection of their deposits in banks. It is important to understand what new guarantees the law provides and how it will affect their financial rights.
I hope this analysis will be useful for you and your audience!
