On Wednesday, the Committee on Finance, Tax, and Customs Policy plans to consider the revised draft law on the activities of the Deposit Guarantee Fund for Individuals. Despite the working group having met several times to improve the document, it still retains a number of controversial norms that make the DGF's activities more closed and remove responsibility from Fund officials, writes UNN.
A number of significant changes have been made to the revised draft law No. 13007-d "On Amendments to Certain Legislative Acts of Ukraine Regarding the Regulation of Certain Issues of the Activity of the Deposit Guarantee Fund for Individuals, the National Bank of Ukraine, and Joint Investment Institutions", which is in the possession of the UNN editorial office, compared to the initial version. However, norms that contradict current legislation and the Constitution of Ukraine still remain.
In particular, this concerns limiting the right of depositors and shareholders of a bank undergoing liquidation to challenge decisions made by the Deposit Guarantee Fund. The draft law significantly reduces the timeframe for filing complaints with the court – to 30 days. According to lawyers, such a period is insufficient for effective preparation of a relevant complaint, given that the draft law simultaneously proposes to allow the Deposit Guarantee Fund not to report to the public on its decisions. Such an innovation will significantly complicate access to public information for depositors, creditors, and shareholders of the liquidated bank, and thus deprive them of the opportunity to timely learn about decisions that could be challenged.
By the way, the draft law also stipulates that if Fund officials are brought to administrative liability, the payment for their lawyers' services must be covered by the DGF. It is worth noting that the most common violation among Fund officials is precisely the violation of the right to access information.
By the way, the Deposit Guarantee Fund's activities are financed precisely by banks that are in the process of liquidation. So it turns out that banks should pay for the services of the Fund's lawyers in cases of administrative violations committed during their liquidation. The only clarification that appeared in the revised version of the draft law concerns an exclusion for corruption offenses. DGF officials will pay for lawyers' services for their defense in such cases out of their own pocket.
Significant remarks also arise regarding the norm concerning the valuation of bank assets, which in most cases does not correspond to reality.
In particular, an appraiser conducts an assessment of bank assets in three weeks. This is used to find investors for an insolvent bank before its liquidation begins. But according to statistics, only 3% of assessments correspond to the true value of bank assets, and 97% of assessments do not correspond to reality.
The proposed bill does not solve this problem. It proposes that representatives of the investor bank, which will ultimately receive the property of the insolvent financial institution, challenge the valuation and appeal to the Deposit Guarantee Fund with a demand for additional compensation or replacement of the property. It is worth noting that the valuation itself is an expensive pleasure, paid for by the DGF.
It is obvious that three weeks is not enough for a proper valuation of the assets of an insolvent bank. This is a consequence of the fact that temporary administration in an insolvent bank is introduced for only 1 month. The previous version of the document provided for extending this period to 3 months, but the revised version still has 30 days. That is, instead of proposing a European approach to property valuation, the revised version leaves everything as it was in the previous version, which was criticized by lawyers and even the Main Scientific and Expert Department of the Verkhovna Rada.
Therefore, the revised draft law contains certain cosmetic concessions, but systemic remarks — regarding legal uncertainty, potential conflict with the Constitution, and risks for investors and creditors — remain relevant.
Let's add
It should be noted that in the conclusion of the Main Scientific and Expert Department of the Rada regarding the draft law, registered by the head of the tax committee of the Rada, Danylo Hetmantsev, it is stated that experts did not see a correlation between this document and the Memorandum between the Government of Ukraine and the IMF.
It should be noted that the accompanying documents to the project... do not provide proper justification for the expected socio-economic, legal, and other consequences of applying the law after its adoption, or other information necessary for reviewing the draft law, which would allow assessing the impact of the innovations proposed therein for withdrawing an insolvent bank from the market, in particular, regarding the protection of depositors' rights from the consequences of bank insolvency, the effectiveness of the procedure for withdrawing insolvent banks from the market, as well as in the context of their compliance with the Memorandum of Economic and Financial Policy dated October 4, 2024, which was signed between the Government of Ukraine and the International Monetary Fund, as mentioned in the explanatory note to the project
Experts emphasize that the draft law does not contain a complete mechanism of legal regulation, and most of the key norms proposed by Hetmantsev, in particular regarding the withdrawal of banks from the market, are left to the discretion of the Fund itself. This, according to experts, makes it impossible to objectively assess the consequences of the law, including its impact on the value of bank assets, the procedure for compensation, and the protection of depositors' rights.
In addition, experts point out that Hetmantsev's draft law effectively grants the Deposit Guarantee Fund powers that fall within the exclusive competence of the National Bank, which contradicts current legislation.
Especially risky, in their opinion, appears to be the point that allows Fund employees to simultaneously work in positions in transitional banks. This creates a potential conflict of interest and expands opportunities for corruption. And the provision on the possibility of not disclosing the Fund's financial statements directly undermines the principles of transparency and accountability.
The proposal of the updated part 5 of Article 18 of the Law regarding the exclusion of the requirement for the Fund to publish annual/quarterly financial statements in accordance with legislative requirements; results of the bank's asset valuation with a breakdown by asset types and indication of the independent appraisal entity, appraisal method, and date of appraisal, appears debatable, as this may negatively affect the publicity and transparency of information regarding the insolvent bank and, consequently, impact the ability of depositors and creditors of the bank to protect their rights and interests.
Recall
Earlier, UNN wrote that after a detailed study of the document, it became clear that the changes to the legislation regarding the DGF's activities proposed by Hetmantsev contradict the Constitution of Ukraine in terms of citizens' right to free ownership of property, as well as the right to judicial appeal and a fair trial. In addition, Hetmantsev's legislative initiative violates a number of existing laws and creates significant corruption risks. Moreover, Hetmantsev's draft law contradicts the obligations undertaken by Ukraine to the International Monetary Fund (IMF) within the framework of the current financing program.