Lawyer: NBU should be held liable for illegal liquidation of Concorde after the relevant court decision enters into force

The person who made the decision to illegally liquidate the profitable Concord Bank must be held accountable. In this case, it is the National Bank of Ukraine. This opinion was expressed in an exclusive commentary to UNN by Oleksandr Lysych, attorney at law of Alekseev, Boyarchukov and Partners.

The Dnipropetrovs'k District Administrative Court found unlawful and canceled the decision of the National Bank of Ukraine to revoke the license and liquidate Concord Bank. Thus, the liquidation of the bank was recognized as illegal. The National Bank stated that it would appeal the court's decision.

"The person who made the decision to illegally liquidate a profitable bank and caused the loss of shareholders' business reputation must be held accountable. In this case, such a person is the National Bank of Ukraine," Lysych said.

He clarified that Part 3 of Article 5 of the Commercial Procedural Code of Ukraine provides that the only remedy for the protection of the rights of persons who are or were members of a bank, whose rights and interests were violated as a result of the withdrawal of an insolvent bank from the market or its liquidation on the basis of an illegal individual act of the National Bank of Ukraine, the Deposit Guarantee Fund, the Ministry of Finance of Ukraine, the National Securities and Stock Market Commission, or a decision of the Cabinet of Ministers of Ukraine, is compensation for the damage in cash.

Therefore, according to him, after the court decision to invalidate and cancel the decision of the Board of the National Bank of Ukraine to revoke the banking license and liquidate Concord Bank enters into force, the bank's owners will be entitled to compensation for their lost assets in a new lawsuit to recover funds from the NBU.

"The legislation on the irreversibility of bank liquidation is relatively new, and even before it was adopted, none of the illegally liquidated banks returned to the market. Therefore, the problem is not so much in the legislation as in the government's position," Lysych said.

He explained that, in fact, the state has only enshrined in law the position that existed informally before the changes in the legislation on the irrevocable liquidation of banks. "This emphasizes the importance of clear and transparent legal regulation in the banking sector, which defines a unified and consistent way to protect the rights of bank shareholders and the type of liability of perpetrators in cases of misconduct by regulators," the lawyer summarized.

Recall

Despite the war in Ukraine, the process of removing banks from the market has not stopped. Thus, as of February 24, 2022, the liquidation process was initiated against 8 banks. Last year, for the first time in Ukraine, not only bankrupt banks but also profitable institutions were subject to liquidation and license revocation, including Concord Bank. The process of depriving a banking institution of its license takes place without a court. Of course, the owners and shareholders of banks can appeal the decision of the regulator, the NBU, after it has made the decision to liquidate the bank, but in general, the process of removing a banking institution from the market, once it has been launched, is irreversible.

In addition, the issue of liquidation of a profitable bank has not been regulated in Ukraine. According to Olena Sosedka, co-owner of Concord Bank, when the regulator announced the decision to liquidate the bank, the financial institution had enough highly liquid assets to make all the necessary payments in 2-3 weeks. But the process of bank liquidation is strictly regulated by law and can generally take up to three years.