Development of Ukrainian Banking System

1
Development of Ukrainian Banking System
2
Main Legislative Acts that Regulatethe Banking
System Activity

• Laws of Ukraine
• On Banks and Banking
• On the National Bank of Ukraine
• On Economic Entities
• On Individuals Deposit Guarantee Fund
• On Securities and Stock Market
• On Prevention and Counteraction of Legalization
  (Laundering) of Earnings Received from Criminal
  Activities
• On Ensuring Creditors Claims and Lien
  Registration
• On Mortgage
• On Mortgage Lending, Operations with
  Consolidated Mortgage Debt and Mortgage
  Certificates
• On Mortgage Bonds
• On Organization of Forming and Circulation of
  Credit Histories

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General Characteristic
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The Number of the Ukrainian Banks (as of October
01, 2007)

• The number of banks registered in the State
  Register of Banks 196
• The number of banks with banking licenses 174
• The number of banks with foreign capital 44,
  including 16 ones with 100 foreign capital

5
Macroeconomic Situation and the Banking System
(as of October 01, 2007)

• Banks assets to GDP ratio 83
• Credit portfolio/GDP 67
• Banks liabilities/GDP 74
• Individuals deposits/GDP 22
• Capital/GDP 10

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Dynamics of the Main Banking System Indicators to
GDP
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The Main Indicators of Ukrainian Banks Activity
(as of October 01, 2007)

• Assets 509 billion UAH ( 71 billion Euro)
• Credit portfolio -410 billion UAH (57 billion
  Euro)
• Banks liabilities 450 billion UAH (63 billion
  Euro)
• Funds of economic agents 105 billion UAH (15
  billion Euro)
• Deposits of individuals 140 billion UAH (20
  billion Euro)
• Regulatory capital 61 billion UAH (9 billion
  Euro)

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Dynamics of assets and credit operationsof
Ukrainian banking System
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The Structure of Credit Operationsof Ukrainian
Banking System(as of 01.10.2007, )
10
Dynamics of credits granted by Ukrainian banks
(in the national and foreign currency)
11
Dynamics of Liabilities, Funds of Economic Agents
and Individual Deposits
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Dynamics of Individuals Deposits in Ukrainian
Banks
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Dynamics of the Regulatory Capital and Capital
Adequacy Ratio of Ukrainian Banks
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15
Foreign capital participationin Ukrainian
banking system
16
Share of Foreign Capitalin the Total Amount of
Foreign Capital of Banksin the context of
countries ()
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Changes in the Legislative BaseIntroduced in 2006

• Changes to the Law of Ukraine On Banks and
  Banking regarding the form of banks
  establishment (OJSC) and increase of the minimum
  authorized capital necessary for a bank
  registration up to 10 million Euro.
• Changes to the Law of Ukraine On Bank and
  Banking which provided for the right of foreign
  banks to open branches on the territory of
  Ukraine.
• Law of Ukraine On Introducing Changes to Certain
  Laws of Ukraine Concerning the Improvement of
  Legal Regulation of the International Cooperation
  in the Area of Terrorism Financing Prevention
  (effective from January 1, 2006).

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Legislative Acts under Consideration ofVerkhovna
Rada of Ukraine

• 1. Draft law on introduction of changes to
  certain Laws of Ukraine (with regard to the
  regulation of banks activities) which envisages
  including the following
• improvement of banks state registration
  procedure
• more clear procedures regulation of determination
  of beneficial owners of banks
• enhancement of cooperation between supervisory
  bodies and external auditors of banks as well as
  peculiarities of conducting audit examinations of
  banks.
• (This Draft law has passed the first reading in
  January 2007).
• 2. Draft law on introduction of changes to
  certain Laws of Ukraine aimed at strengthening
  the role of Individuals Deposit Guarantee Fund in
  the development of the banking system.

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Draft Laws to be submittedto Verkhovna Rada of
Ukraine

• Draft Law on introduction of changes to the Law
  of Ukraine On Banks and Banking which has been
  prepared aimed at the improvement of corporate
  governance in banks.
• Draft Law on introduction of changes to the Law
  of Ukraine On Banks and Banking aimed at the
  development of consolidated supervision.

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The work conducted during 2007 aimed at
Development of Effective Banking Supervision

• Approved the new version of Regulation about the
  order of provision formation under the
  securities-related operations of banks of Ukraine
  (resolution of the NBU Board of 02.02.2007 31)
• approved the Rules of furnishing the consumers
  with information about crediting terms and
  aggregated costs of the loan by banks of Ukraine
  (resolution of the NBU Board of 10.05.2007 168)
  
• methodical recommendations approved in relation
  to improvement of corporate governance in the
  banks of Ukraine (resolution of the NBU Board of
  28.03.2007 98)
• amended the Instruction about the order of
  regulation of banking activity in Ukraine
  (resolution of the National bank of Ukraine of
  19.02.2007 52)
• amended the Regulation about the order of
  formation and use of the loan loss provisions by
  banks (decisions of the NBU Board from 19.03.2007
  83, of 06.07.2007 248 ).

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Defects to be eliminated for providing of further
development and reliability of the banking system

• growth of risks owing to swift growth of
  crediting volumes, first of all, consumer credits
  and crediting in foreign currency
• insufficient level of banking capital
  concentration and its dispersion among a
  significant number of small banks
• presence of the substantial risks connected with
  imbalance of the assets and liabilities by
  maturities
• insufficient level of corporate governance, which
  results in the presence of failings in the
  systems of risk management, internal control,
  cases of violation of legislation and regulations
  of the National Bank of Ukraine
• insufficient transparency of the banking sector.

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Tasks of the National Bank of Ukraineon the Way
of Further Development of Ukrainian Banking System

• Further improvement of banking supervision by
  means of introducing the risk-based supervision
• Increase of banks capital concentration and
  improvement of its quality
• Introduction of supervision on consolidated basis
• Improvement of corporate governance and risk
  management systems in Ukrainian banks
• Enhancement of banking system transparency