Czech Republic: Salan´s Kyiv Banking And Finance Legal Newsletter - February 2009

Last Updated: 17 March 2009
Article by Oleg Batyuk and Natalia Selyakova

Contents

  1. On mitigation of the effect of the financial crisis on banking operations
  2. Amendments to some regulatory acts of the National Bank of Ukraine
  3. Recent publicly announced Banking and Finance deals in Ukraine handled by Salans' Kyiv office

1.On mitigation of the effect of the financial crisis on banking operations

Resolution No. 49 of February 5, 2009 "On certain issues regarding banking operations", adopted by the board of the National Bank of Ukraine

By resolution No. 49 of February 5, 2009 "On certain issues regarding banking operations", the National Bank of Ukraine (the "NBU") gave the following permissions to banks, effective until 01.01.2011:

  • to include in the calculation of regulatory capital any subordinated debt granted in any foreign currency at the rate applicable on the reporting date;
  • as agreed between the relevant parties, to enter into supplementary agreements to extend the effective term of financing agreements (loan agreements) under the terms and conditions of subordinated debt;
  • to set the maximum interest rate for any funds attracted in a foreign currency under the terms of subordinated debt not higher than Libor (for the respective date) for 12-month interbank deposits plus 12 per cent per annum;
  • to include in the equity capital paid but unregistered contributions to the charter capital registered on balance sheet account number 630 "Contributions to unregistered charter capital";
  • following the established requirements, independently and at their own risk to take decisions on the restructuring of loans granted to individuals (natural persons) subject to the financial standing of the borrowers;
  • following the established requirements, to make a one-level increase in the categories of restructured credit operations, with borrowers falling within "B", "V" and "G" ("Б", "В" and "Г" in Ukrainian), where the status of debt servicing performance over the last six months by the respective borrower is deemed "good".

In addition, the NBU has decided not to impose sanctions on banks for failing to meet precautionary standards resulting from increases in the values of foreign currencies, and not to decrease the amount of regulatory capital in the amount of the surplus of the standard value of the N7 and N9 (Н7 and Н9 in Ukrainian) prudential standards (for loans made before 10.10.2008).

It has been resolved as follows:

  • before 01.11.2010, banks must provide for a monthly decrease in the differential between their assets and liabilities if such amount exceeds the amount of their paid up and registered charter capital;
  • from 2009, a factor of 0.5 is to be applied when the results of any revaluation of fixed assets are included in the amount of the regulatory capital;
  • a special approach is applicable to the regulation of operations of banks restructured under the procedure set by resolution of the NBU Board No. 405 of 01.12.2008 "On approval of a special procedure for measures aimed at the financial recovery of banks".

The resolution is effective from 05.02.2009.

2. Amendments to some regulatory acts of the National Bank of Ukraine

Resolution "On amendments to certain regulatory acts of the National Bank of Ukraine" No. 476 of December 30, 2008

NBU Board Resolution No. 476 of 30.12.2008 introduced amendments to the following:

  • "Regulations for the application by the NBU of sanctions for the violation of banking legislation" as adopted by NBU Board Resolution No. 369 of 27.09.2001 regulating certain activities of provisional bank administrators and supervision of such activities by the NBU, revocation of banking licenses and the liquidation of banks;
  • "Regulations on the procedure for the incorporation and state registration of banks, establishment of branches, representative offices and officers thereof" as adopted by NBU Board Resolution No. 375 of 31.08.2001, set a test for applicants for the positions of chairman and chief financial officer of a bank and require an interview with members of the NBU Commission; applicants for the positions of: chairperson, deputy chairperson and members of the supervisory board of a bank, deputy chairman and members of the managing board (board of directors) and deputy chief financial officer of a bank are to be tested by the NBU for their compliance, based on documents submitted; also certain further issues have been covered with respect to the delivery of information to the NBU regarding the dismissal of a bank's chief executive and the approval of new applicants for senior positions;
  • "Guidelines for the procedure regulating banking operations in Ukraine" as adopted by NBU Board Resolution No. 368 of 28.08.2001, which stipulates amendments to financing agreements (loan agreements) under the terms and conditions of subordinated debt, and sets out permission by the NBU to include such funds in the equity capital of a bank as a result of the restructuring of such bank or investor; it is further provided that conclusions as to the operation of a bank, based on the results of any analysis as to its financial standing, must be made within the period set by the executive director of the Directorate for Banking Regulation and Supervision of the National Bank of Ukraine.

The resolution is effective from 13.02.2009.

3. Recent publicly announced Banking and Finance deals in Ukraine handled by Salans' Kyiv office

  • Salans Kyiv banking team has developed a set of master documentation for syndicated lending under Ukrainian law based on Loan Master Agreements from the Loan Market Association. The purpose of this project is to bring the standard documentation into compliance with Ukrainian legislation and existing international banking practice for the development of the Ukrainian syndicated loan market. Six major Ukrainian banks participated in this project.

Salans' Banking and Finance Group, lead by Natalia Selyakova and Nikolay Zhovner in Kyiv, worked on this project.

  • Salans' international arbitration team is proud to announce that its client Vivendi S.A was awarded EUR 1.876 billion in damages against Elektrim, plus interest from February 2005 and legal costs, in a February 12, 2009 award rendered under the auspices of the London Court of International Arbitration (LCIA), concerning its investment in the Polish telecommunications companies Elektrim Telekomunikacja Sp. z.o.o. (Telco) and Polska Telefonia Cyfrowa Sp. Z o.o. (PTC).

All of Elektrim's counterclaims in the arbitration were dismissed. This important victory, one of the highest arbitral awards ever rendered, represents a great achievement for the Salans International Arbitration Practice Group and the recognition of several years of hard work.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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