Powers of the Deposit Guarantee Fund should be reviewed - lawyer

Powers of the Deposit Guarantee Fund should be reviewed - lawyer

Kyiv  •  UNN

November 28 2023, 05:05 PM  •  213687 views

Oleg Malinevsky advises to review the powers of the Deposit Guarantee Fund, advocates judicial control over insolvency procedures, and questions the role of the Fund in managing and liquidating insolvent banks without sufficient supervision.

The powers of the Deposit Guarantee Fund should be revised, and a system of control and deterrence should be applied to the Fund. This opinion was expressed in a commentary to UNN by Oleg Malinevskyi, Vice President and Chairman of the Committee on Judicial Practice of the Ukrainian Advocates Association, Managing Partner of EQUITY Law Firm.

In my In my opinion, the status of the Fund should be revised in general. It is not even a state institution. If you look at its charter, it is, in fact, a legal entity created by the banks themselves, who pay certain contributions to maintain it, and it is quite strange that the state gives this institution all the powers to manage insolvent banks. There should be a system of control and deterrence 

- said the lawyer.

Details

He reminded that the procedure of bank liquidation used to be under some judicial control.

"It was a general bankruptcy procedure with certain exceptions that were specific to banks. But I would like to point out that, as a general rule, the bankruptcy procedure should include a court that verifies the legality of the procedure, the existence of insolvency, and protects and balances the interests of all creditors, the debtor and its shareholders. Since the DGF is only one of the creditors, it is not entirely clear why it replaces the role of the court and other participants in the general procedure. The situation is even stranger when banks do not take funds from the public - that is, they have no deposits, and therefore the Fund does not acquire the status of a creditor or any other relationship to an insolvent bank, but nevertheless it is the Fund that appears and begins to liquidate such an institution by selling its assets. But what does the Fund have to do with it if there are no deposits? And even if the Fund becomes one of the creditors, why is it the Fund that is given the authority to manage the entire liquidation process, where is the court, where are the other creditors, where are the independent insolvency officers?" - Malinevsky asks, adding that the powers in the general bankruptcy procedure are vested in the Creditors' Committee, as well as in the insolvency officer, a representative of a special profession licensed by the Ministry of Justice.

During the bank liquidation procedure, there is no insolvency officer at all - it is personified by the Guarantee Fund and the liquidator, who is an employee of the Fund, which creates a conflict of interest.

"By the way, in terms of By the way, from the point of view of basic norms and principles of human rights protection and the practice of the European Court of Human Rights, this combination of powers, this conflict of interest, this judicial immunity of the Fund is another proof of unjustified state interference in the peaceful enjoyment of property, failure to provide effective mechanisms for protecting the rights of individuals - bank owners and other creditors (in the process of bank liquidation - ed.)," the lawyer added.

Add

In his opinion, the Fund's powers should be divided, and the liquidation process itself can be transferred, for example, to the court with the active participation of the National Bank of Ukraine.

"And, of course, there should be an obligation to work with assets, to collect funds from debtors, and not just to sell these assets at auctions at any price. The powers to rehabilitate banks should also be expanded. For example, if a bank shareholder is ready to take on some costs and efforts to collect debts, then it should probably be given the appropriate tools to carry out such activities. It seems to me that everyone wins here, including the state, the bank's shareholders and the investment climate in the banking sector of Ukraine in general," the lawyer added.

READ ALSO: Lawyer, former ECHR judge on whether banks and their shareholders are protected in Ukraine from arbitrariness in liquidation

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