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RESOLUTION OF BOARD OF THE NATIONAL BANK OF UKRAINE

of February 2, 2024 No. 14

About approval of the Regulations on procedure for regulation of activities of credit unions in Ukraine

According to Articles 7, of 15, of 56, of 58, of 61 Law of Ukraine "About the National Bank of Ukraine", article 23 of the Law of Ukraine "About financial services and finance companies", Articles 33-35, 37, of 38, 49 Laws of Ukraine "About credit unions", for the purpose of ensuring stable activities of credit unions and timely accomplishment by credit unions of obligations to the members, decide ensuring compliance of activities of credit unions to requirements of the legislation of Ukraine for identification of potential risks in their activities, and also minimization of such risks of Board of the National Bank of Ukraine:

1. Approve Regulations on procedure for regulation of activities of credit unions in Ukraine (further - the enclosed Provision).

2. To credit unions:

1) till December 31, 2024 to observe prudential requirements and to perfrom calculation of prudential standard rates according to calculation of the prudential requirements established in appendix 1 to this resolution;

2) as of August 01, 2024, on September 01, 2024, on October 01, 2024, on November 01, 2024 and on December 01, 2024 to perfrom calculation of the prudential norms determined in the Section III of Provisions, the extent of credit risk, uncovered credit risk according to the procedure determined in Chapters 14, of the 15th Section IV of Provisions in the test mode and till August 26, 2024, on September 26, 2024, on October 26, 2024 on November 28, 2024, on December 26, 2024 respectively to inform on results of calculation electronically by sending the electronic message for official electronic mailbox of the National Bank of Ukraine of nbu@bank.gov.ua with the indicators given in the table of value of the prudential standard rates and settlement indicators determined in appendix 2 to this resolution;

3) since January 01, 2025 to observe prudential requirements according to requirements of the Provision.

3. To credit unions which had current licenses on implementation of activities for provision of financial services about day of entry into force of this resolution to bring activities and domestic situations of credit union into accord with requirements of the Law of Ukraine "About credit unions" and requirements of the Provision till July 01, 2024 and to observe prudential requirements of the Provision from the date determined in the subitem 3 of Item 2 of this resolution.

4. To department of methodology of regulation of activities of non-bank financial institutions (Sergey Savchuk) after official publication to inform credit unions information on adoption of this resolution.

5. The resolution becomes effective from the date of, its official publication following behind day.

Approved by the Resolution of Board of the National Bank of Ukraine of February 2, 2024 No. 14

Regulations on procedure for regulation of activities of credit unions in Ukraine

I. General provisions

1. Introduction provisions

1. This Provision is developed according to the Law of Ukraine "About financial services and finance companies", the Law of Ukraine "About credit unions" (further - the Law on credit unions), the Law of Ukraine "About ministerial procedure" (further - the Administrative procedure act) for the purpose of protection of interests of credit union members and ensuring financial reliability of credit unions, control of the risks connected with the capital, liquidity, loan granting, timely accomplishment by credit unions of obligations to the members.

2. Terms in this Provision are used in such value:

1) book value - the cost at which assets and liabilities are reflected in balance. Book value for financial asset and the financial liability consists of the main amount of debt, the added percent, unamortized award (discount), the revaluation amount, and for financial asset amount of provision under the expected credit losses;

2) liquidity of credit union - capability of credit union to provide timely accomplishment of the monetary commitments, determined by balance between terms and repayment sums of the placed assets and terms and the amounts of accomplishment of obligations, and also terms and the amounts of other sources and the directions of use of means by credit union;

3) non-core assets assets (including the non-current assets withheld for sale; the property which carried over credit union as the pawnbroker; fixed assets) which are not used by credit union when implementing activities for provision of financial services, and the investment real estate;

4) restructuring change of essential terms of the contract for the purpose of mitigation of requirements to the debtor in connection with financial difficulties of the debtor and need of creating favorable conditions for accomplishment of obligations by it on asset by the conclusion of the supplementary agreement with the debtor;

5) the authorized person of the National Bank of Ukraine (further - National Bank) - the head of the structural unit of the National Bank responsible for implementation of permanent supervision in the market of non-bank financial services, or person which is carrying out its obligations.

The term "administrative production" is used in this Provision in the value given in the Administrative procedure act.

Other terms used in this Provision are used in the values determined in the Law of Ukraine "About financial services and finance companies", the Law on credit unions, the Administrative procedure act and other legal acts of Ukraine and regulatory legal acts of National Bank.

3. The requirements to credit union determined by this Provision extend to the joint credit union if in this provision other is not specified.

4. Credit unions bear responsibility according to requirements of the legislation of Ukraine for provision to National Bank of unreliable information of rather prudential standard rates.

4-1. The National Bank performs administrative production on decision making, determined by this Provision, according to the administrative procedure act and taking into account the features established by the Law of Ukraine "About the National Bank of Ukraine", the Law on credit unions.

4-2. The beginning of administrative production on acceptance by National Bank of the decisions determined by this provision is day of receipt of the statement of credit union in writing.

The current of term in administrative production begins from the next day after receipt of the statement.

4-3. The National Bank notifies the participant of administrative production on the beginning of administrative production instantly, but no later than the next working day after its beginning, and in the presence of the reasonable reasons - no later than three working days after its beginning.

In the message the rights and obligations of the participant of administrative production determined by Article 28 of the Administrative procedure act including procedure for acquaintance with materials of administrative case, and also methods of representation of the explanations and notes to them on case and the term during which the participant of administrative production has the right to give them are specified.

4-4. The rights and obligations of participants of the administrative production made according to this Provision are determined by the Administrative procedure act and the Law on credit unions.

2. Prudential requirements and standard rates to credit unions

5. The National Bank in this Provision establishes prudential standard rates and procedure for their determination for credit union, namely:

1) standard rates of the capital:

standard rate of sufficiency of the regulatory capital (N 1);

capital adequacy ratio of the first level (N 2);

the combined buffer of the capital (B);

2) standard rates of concentration of credit risk and crediting limits of the connected persons:

standard rate of the maximum extent of credit risk (N 3);

standard rate of big credit risks (N 4);

the standard rate of limits of credit risk of transactions with the faces tied with credit union (N 5);

3) standard rate of liquidity (N 6).

6. The National Bank in addition to the prudential norms determined in Item 5 of Chapter 2 of the Section I of this provision establishes prudential requirements:

1) concerning forming by credit unions of the combined buffer of the capital (B) which consists of the buffer of preservation of the capital (BQ) and buffers for significant credit unions (BZ);

2) by determination of size of credit risk, size of uncovered credit risk and eligibility criterions of providing;

3) about restriction of risks of credit unions on financial instrument transactions.

The National Bank establishes requirements concerning form of creation and additional requirements to contents of the plan of renewal of activities of credit union, its representation for consideration of National Bank and procedure for its consideration in the cases determined in Chapter 13 of the Section IV of this provision.

7. Standard rates of the maximum extent of credit risk (N 3), big credit risks (N 4), limits of credit risk of transactions with the faces tied with credit union (N 5) and the combined buffer of the capital (B) are not applied to the joint credit unions.

8. The credit union calculates and observes the prudential norms determined in the Section III of this provision and also observes the requirements limiting risks of credit unions on financial instrument transactions for any date as of the end of day.

II. Capital of credit union

3. Procedure of payments of the regulatory capital of credit union

9. The regulatory capital is intended for ensuring solvency, covering of negative consequences of various risks which the credit union undertakes in the course of the activities, and provides protection of deposits (deposits), financial stability and stability of activities of credit union.

The regulating capital of credit union consists of the capital of the first level and the capital of the second level.

10. The capital of the first level consists of the elements of equity available to absorption of losses of credit union to ensuring its continuous activities and losses subordinated concerning other components of the regulatory capital for first-priority absorption, and comprises:

1) reserve capital of credit union;

2) equity capital of credit union;

3) other nonrefundable money contributions in credit union (the target fees of credit union members, charitable fees of physical persons and legal entities brought by money).

11. The size of the capital of the first level decreases on:

1) amount of losses of last years and losses of the current year;

2) the amount of obligatory shares on which the decision on return to credit union members is made.

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