Many Ukrainians have already personally experienced the results of the NBU regulations — blocking bank accounts, closing institutions, commissions, reducing the convenience of using cards in the form of limits for everything — from cash withdrawals to the size of transfers and more. New restrictions are introduced constantly and have already ceased to surprise citizens. Where can the desire of the National Bank and the ambitions of Pishnyi lead — in the material.
People's deputies Olga Vasylevska-Smaglyuk, Danylo Hetmantsev, Yevgeny Brahar and others registered draft law No. 9422. The document is supposed to regulate certain issues of the financial services market. However, with the draft law, they want to expand the powers of the National Bank and make the NBU's control over the work of financial companies even tighter.
The draft law provides for the withdrawal of regulatory acts of the National Bank of Ukraine regarding non-banking financial institutions from the scope of the Law “On the Basics of State Regulatory Policy in the Field of Economic Activity”. And the reason for the adoption of the draft law — a populist promise to reduce interest rates in credit organizations and force them to check customers more. But something else is hidden in the bill. With this draft law (if it is adopted), the NBU will continue to strengthen the levers of its influence on the financial market and will receive additional powers of other bodies.
At the same time, the financial services market is already regulated. If the loan rates are unreasonably and quickly limited, this will lead to a drop in the income of some credit organizations and their exit from the market due to unprofitability. Currently, the National Bank has sufficient powers to regulate it, it can fine companies for violating requirements, for overestimating rates, and can revoke licenses. Recently, such organizations as Mister Cash, CC Loan, and ZeCredit have already stopped working in Ukraine by the decisions of the National Bank of Ukraine.
About 420 institutions (mostly financial companies and credit unions) left the market in 2022 alone. In the future, if it does not survive, the microcredit market may disappear or go into the shadows of semi-criminal groups, where the NBU will no longer be able to control anyone. According to the head of MyCredit Vladyslav Belan, as a result of the adoption of this draft law, microfinance organizations will disappear as a phenomenon, the consequences will be catastrophic.
Draft Law No. 9422 also provides for the possibility of representatives of the National Bank to participate in all meetings of the management bodies of commercial banks and conduct remote inspections (previously, such inspections could be conducted only at the bank itself). At the request of the NBU, representatives of the commercial bank will have to provide online access to transfer those documents that will be of interest to the central bank. In order to implement such new powers in banks, it would be logical to create paramilitary guards or other security forces created by the National Bank: this can be done with the help of new draft laws.
The NBU also wants to take on additional powers to control advertising of financial services. First of all, this concerns credit institutions. If the NBU considers that the advertisement does not meet the requirements of the law and does not disclose the financial details of this service — significant fines will await customers. Although advertising belongs to the sphere of regulation of the State Production and Consumer Service. There will also be significantly increased fines for financial institutions for “violation of the rights of credit consumers” (if the National Bank deems it so).
Your financial life should be under the control of the National Bank
However, the most important thing — this is the issue of withdrawing regulatory acts of the National Bank of Ukraine from the scope of the Law “On the Basics of State Regulatory Policy in the Field of Economic Activity”. This law provides that there cannot be a regulator in the industry who is allowed to do everything, there must be a safeguard. The project states that it was developed to fulfill clause 53 of the Memorandum with the International Monetary Fund. However, this point is not a structural and mandatory requirement of foreign partners for urgent implementation. This innovation may violate the standards of regulatory policy, which are in force in developed countries, on the norms of which Ukraine is oriented. Experts of the Association of Financial Market Participants (OUFR) point to this. The OUFR includes 15 associations of the financial market and 2 public associations of its consumers.
Experts have prepared a letter to the President of Ukraine Volodymyr Zelenskyi with the justification why the adoption of draft law No. 9422 puts the democratic participation of the public in the development of regulatory acts of the National Bank of Ukraine is at risk.
The National Bank is now endowed with the functions of regulation, licensing, supervision and control, rule-making, etc. Strengthening “capacity” The NBU cannot do this by depriving market participants of the opportunity to participate in the development of draft documents that determine the operation of the market and establish administrative procedures. However, in order to prepare its regulatory decisions, the National Bank will no longer need to ask the opinion of the public and companies operating in the non-banking financial market. Such closure in work will definitely not contribute to the development of this sector of the economy. And the National Bank does not assess the amount of funds and time needed by market participants to fulfill the new requirements of the NBU.
Market participants fear that the instability and unpredictability of the regulation of the market of non-banking financial institutions will lead to a significant outflow of investments. from this sector, turbulence and will increase the distrust of financial organizations towards the National Bank.
After all, the NBU will be able to adopt acts at its discretion, without discussions with market participants and without taking into account their interests, which significantly change the working conditions in this field. There will be a greater risk of the National Bank making decisions in the interests of certain individuals or business structures, rather than service providers and consumers and society in general. According to experts, the National Bank will be able to legalize actions of the NBU that are questionable from the point of view of legality through its own legal acts.
The State Regulatory Service also points out the dangers of adopting this draft law. They believe that the unilateral adoption of regulations by the National Bank will not allow to ensure the necessary balance of interests of subjects of the banking and non-banking sectors of financial services provision, citizens and the state, and may also be considered as a violation of constitutional requirements.
Why acts of the National Bank can have a corruption component and be ineffective
Financial market experts believe that in the event of the adoption of the draft law, the development of new regulatory legal acts of the NBU will violate Ukraine's international obligations to ensure the rule of law and fight against corruption. Removing regulatory acts of the National Bank regarding non-banking financial institutions from the scope of the Law “On the Basics of State Regulatory Policy in the Field of Economic Activity”; will contradict the Methodology of anti-corruption examination of the National Agency for the Prevention of Corruption (NACP).
The legislation lacks mechanisms of state control over the quality of normative acts of the NBU and their compliance with the legislation. There is no requirement that these acts be registered by the Ministry of Justice, which would require the analysis of such acts for compliance with legislation (including anti-corruption). And the National Bank does not need to coordinate its regulatory acts with the State Regulatory Service of Ukraine, although this would allow for a qualitative analysis and examination of draft NBU decisions. And the National Bank is not obliged to create a public council that could advise how to improve the documents on the regulation of the market of non-bank financial institutions.
Because of this, the normative acts developed by the National Bank often contain errors, inconsistency with laws, and certain mechanisms are corrupt and ineffective. And it is the participation of the public and participants of the financial non-banking market that could help eliminate these problems. It is especially important to take into account the opinion of representatives of financial organizations regarding new norms from the Central Bank during the war. The Committee of the Verkhovna Rada of Ukraine on anti-corruption policy in its conclusions believes that the draft law does not meet the requirements of anti-corruption legislation. But these conclusions were ignored.
Citizens will be deprived of democratic mechanisms to influence the regulatory policy of the National Bank
With the draft law, the deputies want to remove regulatory acts of the National Bank regarding non-banking financial institutions from the scope of the Law “On the Basics of State Regulatory Policy in the Field of Economic Activity”. The latter was developed with the participation of experts from the European Union and complies with European regulatory principles. The law establishes a clear, transparent and democratic procedure for the adoption of regulatory acts by authorities.
This procedure provides for conducting a Regulatory Impact Analysis (RAA), establishes the procedure for publicizing the draft regulatory act, public discussion of the project (with the involvement of the public, associations of market participants), submission of proposals, and the regulator's obligation to consider public proposals. ARV is the main instrument of regulatory policy in the EU, USA, Canada, Great Britain, and Japan. The importance of public participation in decision-making processes (including discussions) is constantly emphasized in the Council of Europe, which includes Ukraine. Therefore, the publication of draft regulatory acts, public discussion – this is a mandatory stage of preparation and adoption of regulatory acts in EU countries. This ensures the preparation of high-quality documents that do not cause outrage in society and contribute to the development of the state.
According to experts, the adoption of draft law No. 9422 by the deputy from “Servant of the People” Olga Vasylevska-Smaglyuk is a step towards the destruction of civil society in Ukraine and the creation of a foundation for instability and unpredictability in the regulatory policy of the National Bank. And at the same time, corruption risks are increasing. This does not correspond to European approaches and contradicts the National Strategy for Promoting the Development of Civil Society in Ukraine, approved by Volodymyr Zelenskyi in 2021. Regulatory legal acts of the NBU regulate the most corruption-risk areas of public relations, therefore they require clear, legally established procedures for their adoption with mandatory public participation.
Also, the National Bank wants to use the tool of “professional judgment” even more in its resolutions. Experts working at the National Bank will draw conclusions regarding violations of legislation and National Bank regulations by participants in the financial market. Decisions can be made based on the conclusions of such an expert. At the same time, the experts will have no responsibility if they abuse their powers.
Andrii Pyshnyi — head of the National Bank of Ukraine
It is extremely dangerous when all power over the market is concentrated in the hands of one government body (which at the same time has unlimited powers in the field of regulation, supervision and rule-making), as is the case with the National by the Bank of Ukraine in the absence of effective mechanisms of checks and balances. At the same time, the NBU behaves as a separate branch of government, not controlled by anyone and not restrained by anything. And its capabilities and powers will only expand. This can lead to abuses, increased corruption, opacity of the market and create significant problems for it. If draft law No. 9422 does not become law, it will be possible to prevent the deepening of these problems in the field of financial services.