February – March 2012

In this Issue:

• On the procedure for the formation and use of reserves by banks to reimburse possible losses resulting from active bank operations
• On amendments to the Rules (provisions) for activities with respect to securities trade
• On approval of the Regulation for transfer of securities through Ukraine’s customs border
• Re: netting settlements related to operations with government securities (DTsP)
• On amendments to the Regulation on cash transactions by banks in Ukraine

• On the procedure for the formation and use of reserves by banks to reimburse possible losses resulting from active bank operations
  Resolution of the Management Board of the National Bank of Ukraine No. 23 dated 25.01.2012 (the “Resolution”)

  The Resolution reviewed the procedure for the formation and use of reserves by Ukrainian banks to reimburse possible losses resulting from active bank operations. Bank assets will now be evaluated integrally and not by their individual components.

  The Resolution stipulates the implementation of uniform approaches to evaluate active operations such as credits, facilities placed in other banks, debtor indebtedness, securities, and financial obligations. The methodology of evaluating the financial standing of borrowers-legal entities has been improved by implementing a mathematical model to calculate the index of their solvency that is based on financial returns and takes into consideration the type of economic activity of borrowers. The influence of the condition of debt service on the classification of assets has been considerably increased, and approaches to accounting of the value of security when calculating the reserve have also been changed. Current approaches to calculate reserves on the basis of analysing the financial standing of a debtor, the debtor’s timeliness and completeness of repayment of debts, and availability and liquidity of security have been preserved in the Resolution.

  Before 31.12.2012 banks must take measures with respect to the review of intrabank provisions and take practical actions with an aim to adjust their activity in accordance with the requirements of the Resolution.  Beginning 01.01.2013, banks must perform the calculation and form in full amount the reserves to reimburse possible losses resulting from active bank operations according to the requirements of the Resolution.

  The Resolution enters into force from the date of its official publication, except clause 6 of this Resolution that enters into force from 31.12.2012.

• On amendments to the Rules (provisions) for activities with respect to securities trade: broker and dealer activities, underwriting, securities management

  Decision of the State Commission for Securities and Stock Market No.1638 dated 15.11.2011 (the “Decision”)

  The Decision restated the Rules (provisions) for activities with respect to securities trade: broker and dealer activities, underwriting, securities management.

  The most essential changes contained in the restated version of the Rules are:

  • time transactions effected by traders (under future and forward contracts, options and swaps) have been regulated;
  • requirements as to organising internal accounting by traders have been reviewed: the components of internal accounting have been determined;
  • obligatory terms and conditions of an agreement on debt service and single order have been reviewed and expanded;
  • the duty of a trader to report to a client has been established – the terms and procedure of preparing and submitting reports to a client have been specified.

  The Decision entered into force on 13.02.2012.

• On approval of the Regulation for transfer of securities through Ukraine’s customs border

  Resolution of the Management Board of the National Bank of Ukraine No. 469 dated 22.12.2011 (the “Resolution”)

  This Resolution specified the procedure for the cross-border transfer of securities as well as rules for issuing individual licenses by the National Bank of Ukraine to perform such operations. Thus, legal entities and individuals have the right to export (transfer) securities outside Ukraine subject to written declaration and individual license of the NBU. Such license is not required if the securities are exported by the same person who imported them to Ukraine subject to confirmation of such fact by a customs declaration.

  It is allowed to import (transfer) securities in foreign currency to Ukraine subject to their written declaration and the securities in hryvnia (UAH) – also subject to an individual license of the NBU. Operations with respect to import (transfer) of securities in hryvnia (UAH) to Ukraine which were previously exported (transferred) by the same person outside Ukraine being confirmed by customs declaration do not need this license.

  Apart from this, the Resolution stipulated the provisions and the procedure for issuing individual licenses of the NBU to export/import securities.

The Resolution entered into force on 10.03.2012.


• Re: netting settlements related to operations with government securities (DTsP)

  Resolution of the Management Board of the National Bank of Ukraine No. 456 dated 15.12.2011 "On Amendments to the Regulation on Depositary Activity of the National Bank of Ukraine” (the “Resolution”)

  By the Resolution, the NBU restated the Regulation on depositary activity of the National Bank of Ukraine with government securities (the “DTsP”). The Resolution provides to the participants of the stock market of the DTsP the access to technologies which are based on netting settlements of securities sale and purchase operations, including internet-trading.

  The Resolution enters into force on 21.05.2012.

• On amendments to the Regulation on cash transactions by banks in Ukraine

  Resolution of the Management Board of the National Bank of Ukraine No. 465 dated 22.12.2011 (the “Resolution”)

  The adoption of the Resolution is aimed to reduce expenditures of clients of banks who have credits in foreign currency. In particular, the provision that repayment of credit in foreign currency by a client in cash in foreign currency is performed by a bank using the client’s current account in accordance with agreements concluded between them has been removed from the Regulation on cash transactions by banks in Ukraine.

The Resolution entered into force on 27.01.2012.

This newsletter does not constitute legal advice with respect to any matter or set of facts and may not be relied upon for such purposes. Readers are advised to seek appropriate legal advice before entering into any transaction, making any determination or taking any action related to matters discussed herein. No part of this newsletter may be copied or quoted without the prior written consent of Salans.

© 2012. All rights reserved.

Salans Kyiv, 21 March 2012