Hetmantsev will try to push through a bill on Thursday that could destroy the depositor protection system
Kyiv • UNN
Hetmantsev's bill, which significantly changes the principles of the Deposit Guarantee Fund for individuals, has drawn criticism due to potential violations of depositors' rights and contradictions with the Constitution of Ukraine.
The Verkhovna Rada Committee on Finance, Tax and Customs Policy, headed by Danylo Hetmantsev, plans to consider a draft law on Thursday, June 26, which significantly changes the principles of the Deposit Guarantee Fund for Individuals (DGF) activities. The draft law, submitted by Hetmantsev, has already caused a storm of criticism from lawyers, people's deputies, human rights activists, and financial policy experts. It has been called a dangerous, unconstitutional initiative that threatens Ukraine's cooperation with the International Monetary Fund (IMF) and undermines the rights of depositors and creditors, UNN writes.
The committee meeting will be held on Thursday at 11:30. In addition to Hetmantsev's legislative initiative - draft law №13007 "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", it is planned to consider an alternative draft law under number 13007-1 "On Amendments to Certain Legislative Acts of Ukraine Regarding the Regulation of Certain Issues of the Activity of the Deposit Guarantee Fund for Individuals and the National Bank of Ukraine".
What is wrong with Hetmantsev's draft law
Despite declarations of strengthening depositor protection, the draft law, initiated by the head of the Rada's tax committee, actually deprives them of a number of fundamental rights. The document contains provisions that effectively make it impossible to challenge the actions of the Deposit Guarantee Fund in court during the liquidation of banks, thereby violating the Constitution of Ukraine. Depositors, shareholders, and creditors will not be able to effectively protect their funds or receive fair compensation in the event of a bank's liquidation.
In addition, the proposed changes contradict legislation that guarantees everyone access to complete and reliable information about financial services. Hetmantsev's draft law not only narrows these rights but also opens up the possibility for backroom management of liquidated bank assets without any public or judicial control.
Another challenge is the lack of transparency. The document allows the Deposit Guarantee Fund and the National Bank of Ukraine to restrict access to information about bank liquidation processes, which directly contradicts the Law "On Access to Public Information," which requires openness from state bodies. Without public control, the risk of abuse and corruption by DGF officials increases.
The absence of clear deadlines, transparent mechanisms, and the possibility of judicial protection makes depositors, creditors, and shareholders of a bank undergoing liquidation defenseless against the arbitrary actions of state bodies. Moreover, the very fact of depriving the right to property and control over money threatens a massive outflow of deposits from the banking system. In such a system, depositors can wait for months, and sometimes years, for their funds to be returned.
Criticism from Rada experts
The Main Scientific and Expert Department of the Verkhovna Rada has already criticized Hetmantsev's draft law. According to experts, the document contains systemic violations of current legislation, legal uncertainty, contradicts the Constitution of Ukraine, and cannot be assessed for compliance with the Government's obligations to 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 considering the draft law, which would allow assessing the impact of the proposed innovations on the withdrawal of an insolvent bank from the market, in particular, on the protection of depositors' rights from the consequences of bank insolvency, the effectiveness of the procedure for withdrawing insolvent banks from the market, and in the context of their compliance with the Memorandum on Economic and Financial Policy of October 4, 2024, signed between the Government of Ukraine and the International Monetary Fund, which is mentioned in the explanatory note to the project
Experts emphasize that the draft law does not contain a complete mechanism for legal regulation. According to them, 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. Such an approach, according to experts, makes it impossible to objectively assess the consequences of applying the law, including the impact on the value of bank assets, the procedure for compensation, and the protection of depositors' rights.
In addition, experts criticized the vagueness and incorrectness of the definition of key concepts such as "open competition," "interested person," and "critically important bank." In their opinion, the draft law actually grants the DGF powers that belong to the exclusive competence of the National Bank, which contradicts current legislation.
Particularly risky, in their opinion, is 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.
Experts also criticized the norm regarding the exclusion of the requirement for the Fund to publish annual/quarterly financial statements; the results of the bank's asset valuation with a breakdown by asset type and an indication of the independent appraisal entity, the method of valuation, and the date on which the valuation was performed. In their opinion, this could negatively affect the publicity and transparency of information regarding an insolvent bank and, as a result, affect the ability of depositors and creditors of the bank to protect their rights and interests.
Serious concerns for the Main Scientific and Expert Department of the Parliament are also raised by the limitation of the possibility to challenge the results of open tenders or the actions of the Fund, as provided for in the draft law. This refers to the reduction of the statute of limitations to one month, which may limit access to justice.
The provisions that allow the Fund to acquire ownership of property left for safekeeping by bank clients if they did not claim it in time also received devastating criticism. This violates Article 41 of the Constitution of Ukraine, which guarantees everyone free possession of property, and Protocol No. 1 to the European Convention on Human Rights.
The permission proposed by Hetmantsev to change the creditor without the debtor's consent, according to experts, directly contradicts the norms of the Civil Code of Ukraine. Also unacceptable is the removal of the prohibition on the separation of a legal entity from an investment fund, which can create risks of asset dilution, and thus introduces additional opportunities for abuse.
In conclusion, the Scientific and Expert Department believes that there is a risk of creating new legal conflicts, losing control over the procedure for withdrawing banks from the market, and significantly reducing the protection of depositors' rights. In addition, it is interesting that experts did not see a correlation between the draft law and the Memorandum between the Government of Ukraine and the IMF, the need for the implementation of which Danylo Hetmantsev uses to justify the need for the adoption of his legislative initiative.
What does the alternative draft law propose?
The alternative draft law, prepared by members of the Rada's tax committee Nina Yuzhanina and Andriy Nikolaenko, contains a number of innovations in regulating the activities of the Deposit Guarantee Fund for Individuals. The explanatory note to the draft law states that the document proposes to grant the executive directorate of the Fund new powers, in particular - to independently determine the list of persons to whom banking secrecy will be disclosed during the withdrawal of an insolvent bank from the market.
Another significant change is placing responsibility on the Fund for the obligations of banks arising during their temporary administration or liquidation procedures. It is also proposed to oblige the DGF to register its normative acts in the manner established for executive authorities. At the same time, the executive directorate of the Fund will receive the right to independently initiate preparation for the withdrawal of a bank from the market, including conducting a competition and choosing the most effective method of withdrawal.
The project allows for a repeated open competition if the first attempt did not take place. It is also proposed that the transfer of employment contracts of employees of an insolvent bank to a transitional bank be carried out in accordance with labor legislation, as already provided for by the norms of current legislation.
A separate point proposes that before the competition, the Fund must receive a report on the fair value of the bank's assets, prepared by an auditor. In addition, the draft law provides for the Fund's right to manage funds that were not received by creditors and to transfer these funds to the bank's shareholders. The document also establishes new rules for the distribution of residual property of liquidated banks and secures the Fund's control over all stages of the process.
"In addition, unlike the main draft law, the alternative draft law does not contain excessive powers of the Fund to determine the status of critically important banks for the functioning of the economy and ensuring the livelihoods of the population during a special period, which, according to legislation, are the exclusive powers of the NBU," the explanatory note states.
The alternative draft law also proposes to save the Fund's funds, therefore it does not provide for the involvement of a separate advisor who would search for an investor for a transitional bank during its sale.
In addition, unlike Hetmantsev's draft law, the alternative one does not allow the Fund to pay for the legal defense of its employees if lawsuits are filed against them or they are brought to administrative responsibility after dismissal. For example, this refers to situations where an employee may be fined for violating laws in the field of financial monitoring or money laundering. The basic version of the draft law proposed to cover such expenses at the expense of the Fund itself.
What do Rada experts say about the alternative draft law
In its conclusion on draft law No. 13007-1, the Main Scientific and Expert Department pointed out the need to refine some legal formulations. Experts drew attention to certain inconsistencies and potential contradictions in the terms and constructions of the draft law. In particular, in their opinion, the concepts of "open competition" and "interested person" require a clearer definition to avoid ambiguous interpretation in the future work of the Deposit Guarantee Fund for individuals.
Provisions regarding property rights also need improvement. In particular, experts point out that the draft law contains a number of norms related to the procedure for disposing of the residual property of a liquidated bank. They advise refining them, taking into account the provisions of the Constitution of Ukraine, Ukrainian legislation, and international law, to better balance the interests of shareholders and avoid the risks of legal uncertainty in property matters.
In addition, experts advise expanding the analysis of possible socio-economic and legal consequences of the implementation of the draft law.
Instead of conclusions
Already on Thursday, the head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, Danylo Hetmantsev, will obviously try to push through his draft law, which is an obvious attempt to turn the Deposit Guarantee Fund for Individuals into a closed structure that is not controlled by the public, the judiciary, and contradicts agreements with international partners. Its adoption could jeopardize banking stability, violate depositors' rights, and contradict Ukraine's international obligations.
