The IMF demanded transparency, but will get corruption risks: what is wrong with Hetmantsev's draft law on the DGF
Kyiv • UNN
The IMF demands transparency in the activities of the Deposit Guarantee Fund, but draft law No. 13007 only increases corruption risks. The document, initiated by Danylo Hetmantsev, expands the DGF's powers, making it a de facto uncontrolled structure without proper judicial oversight. Depositors may lose the right to timely reimbursement of funds, and the transfer of assets of liquidated banks risks becoming a closed and corrupt process.
Ukraine has been cooperating with the International Monetary Fund (IMF) for many years, fulfilling its commitments to reform its financial system. One of the IMF's key requirements is to improve the legislation on the Deposit Guarantee Fund (DGF). In particular, the international partners insisted on the introduction of an open competition for the appointment of the DGF's managing director, which would ensure the transparency and independence of this institution. Another requirement was to introduce effective mechanisms to control the Fund's activities. However, instead of implementing real reforms aimed at protecting depositors, the chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, Danylo Hetmantsev, used the IMF's requirements as an excuse to submit draft law No. 13007. This document not only expands the powers of the DGF, but also makes it completely manual, creating preconditions for large-scale corruption, UNN writes.
Empowerment of the DGF: control without responsibility
The draft law envisages a significant strengthening of the role of the Deposit Guarantee Fund, effectively making it an uncontrolled structure. That is, the DGF's capabilities are significantly expanded, but the public will not have a mechanism to control its activities. According to the provisions of the document, the DGF is given the opportunity to:
- independently make decisions on the management of assets of liquidated banks without transparent valuation mechanisms;
- deprive depositors of the right to timely reimbursement;
- limit the possibility of judicial appeal of their actions.
In particular, the draft law submitted by Hetmantsev proposes to effectively deprive depositors of the right to timely reimbursement and eliminate transparent compensation mechanisms.
The MP also proposes to unlawfully deprive the clients of a bank in liquidation who have used the services of a custodian of their funds if they do not claim their funds within 90 days of receiving the relevant notification. A similar procedure for misappropriation of other people's funds is envisaged in the draft law for shareholders and creditors who fail to file a timely claim.
Such a legislative initiative contradicts the provision of the Constitution of Ukraine on the right to free possession of property.
Hetmantsev also proposes to significantly expand the DGF's asset management capabilities and, at the same time, to effectively take away the possibility of judicial review of DGF decisions from the participants in the bank liquidation process.
In addition, it is proposed to limit the timeframe for participants in the bank liquidation process to 1 month for appealing against DGF decisions in courts. This contradicts the general principles of civil law and creates preconditions for abuse by responsible officials.
"The 1-month deadline for appealing against the DGF's decisions is unreasonably short and makes access to justice much more difficult for depositors, businesses and other stakeholders. Given the complexity of financial disputes, the need to analyze documents, collect evidence and engage experts, such a limited period actually deprives people of the possibility of effective defense," Dmytro Kasyanenko, founder of Kasyanenko & Partners Law Firm, told UNN.
According to him, depositors whose rights have been violated often learn about illegal actions with a delay, and by the time the information becomes public, the possibility of appeal is already lost.
One month is a critically short period of time, as even receiving official responses from government agencies can take longer. Additionally, it should be noted that appealing against the actions of the Deposit Guarantee Fund usually requires in-depth financial and legal analysis, and in case of violations in the asset sale procedure, it also requires the involvement of forensic experts. Such a restriction creates conditions for abuse by officials and significantly complicates the possibility of reviewing disputed decisions
He emphasized that this does not comply with Article 55 of the Constitution of Ukraine, which guarantees everyone the right to judicial protection, and also contradicts the practice of the European Court of Human Rights, which requires reasonable time limits for applying to the court.
According to Kasyanenko, there are several obvious situations that prove that a month is not enough. For example, the assets of a liquidated bank may be sold at a significantly reduced value as a result of collusion between bidders, and the depositor learns about it only after the deadline has passed. There may also be situations where documents containing technical or legal errors are submitted to the court, which will take time to correct, and the applicant simply does not have time to submit revised evidence.
In addition, in many cases, people simply do not receive timely information about auctions or transactions, which deprives them of the opportunity to act promptly. This clearly contradicts the principle of equal access to justice.
The minimum reasonable period for appealing such decisions should be at least three to six months, as is the case for most disputes in commercial and administrative proceedings. In order to avoid abuse and violations of citizens' rights, exceptions should be provided to extend the appeal period in cases where a person was unable to learn about the violation in time or faced bureaucratic obstacles. It is also necessary to establish a mechanism for suspending the appeal period in case of delayed access to information or documents. Otherwise, this draft law will open up wide opportunities for making dubious decisions without a real possibility of their revision
The elimination of judicial oversight of the DGF contradicts the principles of the rule of law and creates preconditions for large-scale abuse. Thus, the assets of liquidated banks may be distributed in a non-transparent manner, leading to corruption schemes and loss of confidence in the financial system.
Restrictions on access to public information
The legislative initiative promoted by Hetmantsev also contradicts the Law on Access to Public Information. This law guarantees everyone the right to receive information held by the authorities. State institutions are obliged to ensure openness, transparency and accessibility of data on their activities. Restrictions on access are possible only on legal grounds and cannot be used to conceal human rights violations.
However, the draft law proposed by Hetmantsev significantly restricts access to information on the transfer of bank assets, as it gives the Deposit Guarantee Fund (and the National Bank of Ukraine) the right to restrict public access to data on bank liquidation processes.
Closed information on the management of assets of liquidated banks will complicate public control, creating conditions for possible abuse and manipulation in the distribution of assets. The work of the DGF will become less transparent, depriving citizens of the opportunity to find out how their funds are used and to respond promptly to possible violations. In addition, the lack of information will complicate litigation related to challenging the DGF's actions.
All of this significantly increases corruption risks in the process of bank liquidation. As a result, confidence in the financial system and government institutions is declining among both Ukrainian citizens and foreign investors.
Creation of corruption risks
The draft law initiated by Hetmantsev provides for a significant expansion of the powers of the Deposit Guarantee Fund (DGF). At the same time, the document does not contain effective mechanisms to control the Fund's activities, which creates serious corruption risks.
In particular, it is proposed to allow the DGF to transfer bank assets without open tenders and proper assessment of their market value. This opens up opportunities for corruption schemes, as the DGF will be able to sell the assets of banks being liquidated at reduced prices to companies related to their former owners.
The proposed changes directly violate the provisions of the Law of Ukraine "On Prevention of Corruption":
- Article 3: "State bodies shall ensure transparency of their activities and prevent corruption risks."
- Article 5: "State decisions shall be made with due regard for anti-corruption mechanisms and transparency of procedures."
- Article: "Officials are obliged to avoid conflicts of interest and may not make decisions that facilitate illicit enrichment."
Hetmantsev is actually proposing that the parliament pass a law that makes it impossible to exercise real control over the DGF's activities. The introduction of such norms limits the ability of state bodies to conduct inspections and conduct an effective audit of the Fund.
If this draft law is adopted, the risk of "manual control" of the banking system will increase significantly. The DGF will be given almost unlimited powers in the process of liquidating banks, beyond the control of the state, society, or the judiciary.
Obviously, the IMF did not demand that the rights of depositors, shareholders and creditors of liquidated banks be restricted, along with the elimination of mechanisms to control the activities of the Deposit Guarantee Fund. Moreover, these changes may have a negative impact on Ukraine's European integration, as the EU pays special attention to the protection of citizens' rights and the rule of law.
If this law is passed, creditors and depositors risk being left without effective mechanisms to protect their rights. This, in turn, could lead to massive lawsuits in the European Court of Human Rights and additional costs for the state budget of Ukraine.
In addition, the adoption of this law will pose a serious threat to the stability of the banking system. The loss of confidence in the deposit guarantee institution could lead to an outflow of deposits, which would have negative consequences for the economy. Such changes in the banking sector will also scare away investors, which will significantly worsen the investment climate in the country.
In the context of war and economic instability, the authorities should not usurp their powers, but rather strengthen mechanisms for protecting citizens' rights and ensuring transparency of the financial system.