RESOLUTION OF BOARD OF THE NATIONAL BANK OF UKRAINE

of August 28, 2001 No. 368

About approval of the Instruction about procedure for regulation of activities of banks in Ukraine

According to requirements of the Laws of Ukraine "About the National Bank of Ukraine" and "About banks and banking activity" and for the purpose of ensuring stable activities of banks and timely accomplishment of obligations to their investors by them the Board of the National Bank of Ukraine DECIDES:

1. Approve the Instruction about procedure for regulation of activities of banks in Ukraine it (is applied).

2. To general department of banking supervision (P.V.Andrushchenko) and Department of informatization (A. S. Savchenko) till 01.10.2001 to make corresponding changes to program complex of the automated calculation of economic standard rates and to timely bring it to permission of territorial administrations of the National Bank of Ukraine and banks.

3. To banks to accept the finished program complex of the automated calculation of economic standard rates in accomplishment and since 01.11.2001 to carry out its trial operation.

4. Since 01.01.2002 banks perfrom calculation of economic standard rates according to the Instruction about procedure for regulation of activities of banks in Ukraine approved by this resolution.

5. To general department of banking supervision (P.V.Andrushchenko) and territorial administrations of the National Bank of Ukraine since 01.01.2002 to exercise control of observance of obligatory economic standard rates by banks on new program complex according to the Instruction about procedure for regulation of activities of banks in Ukraine approved by this resolution.

Till 01.01.2002 banks shall observe economic standard rates according to the Instruction about procedure for regulation and the analysis of the activities of commercial banks approved by the resolution of Board of the National Bank of Ukraine of 14.04.98 No. 141 and the corrective action registered in the Ministry of Justice of Ukraine 15.05.98 for No. 323/2763, for violation of which shall be applied according to Chapter 7 of the Regulations on application by the National Bank of Ukraine to banks and other financial credit institutes of corrective actions for violation of the bank law approved by the resolution of Board of the National Bank of Ukraine of 26.05.2000 No. 215 and registered in the Ministry of Justice of Ukraine 03.07.2000 for No. 382/4603 (with changes).

6. Recognize invalid:

Procedure for provision of permission to accounting of the raised funds on the terms of subordinated debt to the capital of bank, the No. 518 approved by the resolution of Board of the National Bank of Ukraine of 25.10.99 and registered in the Ministry of Justice of Ukraine 15.11.99 for No. 786/4079 (with changes);

The instruction about procedure for regulation and the analysis of activities of commercial banks approved by the resolution of Board of the National Bank of Ukraine of 14.04.98 No. 141 and registered in the Ministry of Justice of Ukraine 15.05.98 for No. 323/2763 (with changes).

7. The resolution becomes effective in 10 days after its state registration in the Ministry of Justice of Ukraine, except Item 6, which becomes effective since 01.01.2002.

The instruction about procedure for regulation of activities of banks in Ukraine approved by this resolution becomes effective since 01.01.2002.

8. To general department of banking supervision (P.V.Andrushchenko) to bring this resolution after its state registration to permission of independent structural divisions of the National Bank of Ukraine, territorial administrations of the National Bank of Ukraine, and also banks for management and use in work.

9. To impose control of execution of this resolution on the vice-chairman V. L. Krotyuk, General department of banking supervision (P.V.Andrushchenko), Operation management (V. D. Shchutsky) and chiefs of territorial administrations of the National Bank of Ukraine.

 

Approved by the Resolution of Board of the National Bank of Ukraine of August 28, 2001 No. 368

The instruction about procedure for regulation of activities of banks in Ukraine

Section I. General provisions

This Instruction is entered for the purpose of ensuring stable activities of banks and timely accomplishment of obligations to investors by them, and also prevention of the wrong resource allocation and loss of the capital because of the risks inherent in banking activity.

The instruction is developed according to the commonly accepted principles and standards in the international practice.

According to the Law of Ukraine "About the National Bank of Ukraine" and the Law of Ukraine "About banks and banking activity" the National Bank of Ukraine (further - National Bank) establishes the procedure for determination of the regulatory capital of bank and such economic standard rates which are all banks, obligatory for accomplishment:

standard rates of the capital:

minimum size of the regulatory capital (N 1),

sufficiency (adequacy) of the regulatory capital (N 2),

capital adequacy (N 3),

standard rates of liquidity:

coverage ratio of liquidity (LCR) on all currencies (LCRBB) and in foreign currency (LCRIB);

coefficient of net stable financing (NSFR);

standard rates of credit risk:

the maximum extent of credit risk on one partner (N 7),

big credit risks (N 8),

the maximum extent of credit risk on transactions with the faces tied with bank (N 9),

standard rates of investment:

investment into securities separately on each organization (N of 11)-1,

total amount of investment (N 12).

For the purpose of increase in stability of banks in the period of financial and economic instability, creation of capital inventory by them for increase in capability to resist to risks the National Bank establishes requirements for forming of capital buffers by banks, namely: buffers of preservation, counter-cyclical buffer and buffer of systemic risk.

For systemically important banks the National Bank also establishes requirements for forming of the buffer of system importance.

If transactions are performed by bank at the expense of the capital according to requirements of this Instruction, then such transactions do not join in calculation of economic standard rates base for calculation of which the regulatory capital is.

The bank when calculating economic standard rates uses the credit ratings of debtor/partner/asset on the international scale determined by rating agencies "Standard&poor" s ", " Moody "s Investors Service", "Fitch Ratings" taking into account Item 38 of the Section II of Provisions on determination by banks of Ukraine of the extent of the credit risk on active banking activities approved by the resolution of Board of the National Bank of Ukraine of June 30, 2016 No. 351 (with changes) (further - No. Provision 351).

Action of this Instruction extends to all banks of Ukraine irrespective of patterns of ownership.

To National Bank of unreliable information of rather economic standard rates banks bear responsibility according to requirements of the current legislation of Ukraine for provision.

Section II. Regulatory capital of bank

Chapter 1. Procedure of payments of the regulatory capital of bank

1.1. The regulatory capital is one of the most important indicators of activities of banks which basic purpose is the covering of negative consequences of various risks (2) which banks undertake in the course of the activities, and ensuring protection of deposits, financial stability and stable activities of banks.

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(2) Risks in banking activity follow from specifics of banking activities which are performed in the conditions of the market relations, and mean probability of receipt of the income, smaller from expected, reduction in cost of assets. The raised bank risks lead to considerable financial losses and, as a result, to bankruptcy of banks.

Banks for the purpose of determination of the actual size of the regulatory capital taking into account risks in the activities shall estimate constantly quality of active banking activities (to perform their classification), and also to determine the extent of credit risk according to the Provision No. 351.

Banks determine credit risk in currency, the corresponding currency of active banking activities.

Banks determine the size of credit risk by all active banking activities as the cumulative extent of credit risk on these transactions as of the first day of every month following for reporting in hryvnia (taking into account credit risk on active banking activities in foreign currency in hryvnia equivalent on the official rate of hryvnia to the foreign currencies established by National Bank).

Banks determine the size of uncovered credit risk as follows:

If the size of credit risk is less or is equal to the amount of the cumulative size of the reserves on active banking activities created according to requirements of international accounting standards (further - the size of reserves according to IFRS), the size of writedown of the financial assets estimated at fair value, and expected credit losses which according to the regulatory legal act of National Bank concerning accounting of financial instruments are reflected in separate analytical accounts of discounts if such credit losses are not considered on accounts of reserves (further - the expected credit losses reflected on accounts of discounts) then the size of uncovered credit risk is equal to zero;

if the size of credit risk exceeds the amount of the size of reserves according to IFRS, the size of writedown of the financial assets estimated at fair value, and the size of the expected credit losses reflected on accounts of discounts, then the size of uncovered credit risk is equal to the amount of such excess.

The size of uncovered credit risk is calculated as of the first day of every month following for reporting and joins in calculation of standard rates of the capital within the next month in the procedure established by National Bank.

The bank when calculating the regulatory capital reduces profit of bank by the size of uncovered credit risk, namely:

retained earnings of last years;

result of the current and accounting year (profit).

If the size of uncovered credit risk exceeds the size of profit of bank, then the size of fixed capital of bank decreases by the amount of such excess.

1.2. The regulatory capital of bank - set of the basic (the 1st level) of the capital and additional (the 2nd level) the capital.

Fixed capital is considered to the invariable and not subject transfer, redistribution and shall cover the current losses completely.

The supplementary capital has less permanent nature and its size is exposed to changes.

1.3. Fixed capital (the capital of the 1st level) consists of such elements:

a) actually paid registered authorized capital. Bank - the legal successor considers in fixed capital the registered authorized capital of bank which is reorganized, from the next day after signing of the transfer act / distribution balance by participating banks of reorganization;

b) additional contributions of shareholders in the authorized capital;

c) financial aid of shareholders of bank;

d) the profit directed to increase in the authorized capital;

d) the opened reserves - the reserves and funds created or increased for the retained earnings account are also promulgated in the financial reporting of bank:

issued differences. Issued differences (share premium) - the amount of excess of the receipts received by the issuer from issue (release) of own shares (other corporate laws) over nominal value of such shares (other corporate laws) (in case of their primary placement);

the reserve funds created according to the laws of Ukraine;

the general reserves created under uncertain risk when carrying out banking activity;

other funds of bank.

These components join in the capital of the 1st level only provided that they correspond to the following criteria:

contributions to reserves and funds are performed from profit after the taxation or from profit to the taxation corrected on all potential tax liabilities;

purposes of reserves and funds and movement of means on these reserves and funds it is separately opened in promulgated reports of bank;

funds shall be at the disposal of bank for the purpose of unrestricted and their immediate use for covering of losses;

any covering of losses at the expense of reserves and funds is carried out only through the profit and loss account;

e) the capital tool with write-off/conversion conditions;

e) the general size of fixed capital is determined taking into account the size of the expected (possible) losses by pending obligations of any physical person or legal entity, both the resident, and the nonresident which has with bank relations of financial nature (further - the partner), and decreases by the amount:

intangible assets minus depreciation amount;

the capital investments in intangible assets;

assets with right to use which underlying assets are intangible assets minus depreciation amount; losses of last years;

losses of the current year;

losses from the transactions with shareholders received after June 4, 2016;

book value of assets (the non-current assets withheld for sale; the property which carried over bank as the pawnbroker; fixed assets) which are not used by bank when implementing the types of activity determined by article 47 of the Law of Ukraine "About banks and banking activity", the investment real estate (further - non-core assets), except:

share par value (shares) of own issue which sale is performed by bank with payment deferral before the date of receipt by bank of money in full amount according to all shares (shares) according to the purchase and sale agreement;

share par value (shares) of own issue which sale is performed by bank with payment deferral before the date of receipt by bank of money in full amount according to all shares (shares) according to the purchase and sale agreement;

the residential real estate received in property till December 30, 2021 (inclusive) which keeps no more than three years, and received in property till December 31, 2021 which keeps no more than two years;

other assets received in property till December 30, 2021 (inclusive) which keep no more than three years and received in property till December 31, 2021 which keep no more than one year.

Banks reduce the size of fixed capital by the amount of book value of non-core assets taking into account paragraphs of the tenth, eleventh subitem "e" of Item 1.3 of Chapter 1 of the Section II of this Instruction using the following coefficients:

till January 13, 2021 (inclusive) - 0;

since January 14, 2021 - 0,25;

since December 31, 2021 - 0,5;

since December 30, 2022 - 0,75;

since December 29, 2023 - 1.

The bank determines book value of non-core assets by which fixed capital, according to the Method of calculation of economic standard rates of regulation of activities of banks in Ukraine established by National Bank decreases.

1.4. The supplementary capital (the capital of the 2nd level) consists of such elements:

a) the result of revaluation of fixed assets, joined in the amount of the regulatory capital of banks as of 31.12.2010.

Banks shall submit the message on the amount of value addition of fixed assets which is included in the regulatory capital to National Bank no later than five working days since such inclusion.

In calculation of the standard rate of sufficiency (adequacy) of the regulatory capital (The N 2) by the time of confirmation of result of revaluation of fixed assets by the auditor (auditing firm) the amount of value addition of fixed assets is not considered;

b) the result of the current and accounting year (profit) reduced by the amount:

imputed incomes, uncollected more than 30 days from the date of their charge which payment due date did not expire (except the income on the securities carried to the I group of assets with risk degree of 0 percent according to requirements of the subitem "an" of Item 1.3 of Chapter 1 of the Section IV of this Instruction, the income for financial assets by which extent of book value the size of the regulatory capital according to requirements of Item 1.8 of Chapter 1 of the Section II of this Instruction, the imputed incomes recognized by bank during acquisition of bonds of internal state loan, emitted in foreign currency, and reflected on accounts of imputed incomes decreases), the created reserves reduced by the amount, writedown of financial assets which are carried at fair value with recognition of revaluation through profits/losses, the expected credit losses reflected on accounts of discounts and increased by the amount of revaluation of financial assets carried at fair value with recognition of revaluation through profits/losses, in part which belongs to such imputed incomes. Imputed incomes according to the debt securities emitted in foreign currency by the central executive bodies of Ukraine, uncollected more than 30 days from the date of their charge which payment due date did not expire join in such imputed incomes using coefficients:

till March 31, 2021 (inclusive) - 0;

since April 01, 2021 - 0 according to the debt securities which are acquired/acquired in property till March 31, 2021 (inclusive);

since April 01, 2021 - 0,2 according to the debt securities which are acquired/acquired in property after March 31, 2021;

since December 31, 2021 - 0,5 according to the debt securities which are acquired/acquired in property after March 31, 2021;

since June 30, 2023 - 1 according to the debt securities which are acquired/acquired in property after March 31, 2021;

imputed incomes which payment due date according to the agreement expired, the created reserves reduced by the amount, the writedowns of the financial assets carried at fair value with recognition of revaluation through profits/losses, expected the credit losses reflected on accounts of discounts, and increased by the amount of revaluation of the financial assets carried at fair value with recognition of revaluation through profits/losses in part which belongs to such imputed incomes.

If the profit of the current and accounting year is less than total amount of adjustment, then the size of fixed capital of bank decreases by the amount of such difference.

The profits and losses from transactions with shareholders got till June 04, 2016 join in the regulatory capital of bank as a part of result of the current and reporting years. 

c) subordinated debt which is considered in the capital (the subordinated capital);

d) retained earnings of last years;

") the capital tool with write-off/conversion conditions which turns on in the supplementary capital.

1.5. The subordinated debt is the regular debt capital instruments (constituent elements of the capital) which are not provided with bank which according to the agreement cannot be taken from bank before five years, and in case of bankruptcy or liquidation return to the investor after repayment of claims of all other creditors. The amount of the subordinated debt included in the capital annually decreases by 20 percent of its primary size within five last years of validity.

Sources of forming of means of subordinated debt are own and/or raised funds of the investor, except attracted from debtor bank.

The bank for the purpose of inclusion of subordinated debt in the capital of bank confirms sources of forming of means of subordinated debt.

The subordinated debt joins in the capital of bank after receipt of permission of National Bank.

1.6. Financial aid of shareholders (the amount of irretrievable financial aid, forgiveness of the credits, deposits (deposits), subordinated debt, etc.) joins in fixed capital of bank after receipt of permission of National Bank.

Source of forming of means of financial aid of the shareholder are own means of the shareholder which are provided in cash and is irrevocable.

The bank for the purpose of inclusion of financial aid of the shareholder in the capital of bank confirms source of forming of means of financial aid of the shareholder.

1.7. During calculation of total amount of the regulatory capital the general size of the supplementary capital cannot be more than 100 percent of fixed capital.

1.8. For determination of the size of the regulatory capital of bank the general size of the capital of the 1st and 2nd levels in addition decreases on:

a) book value of the shares and other securities with unstable profit issued by banks are also carried at fair value;

b) book value of investments into the associated and subsidiary companies, and also book value of investments in the capital of other organizations in the amount of 10 and more percent of their authorized capital;

c) book value of shares (shares) of own issue accepted in providing the loans (other investments) granted by bank;

d) book value of the extra listing securities (except the securities emitted by the central executive bodies, and the Public mortgage institution) carried at fair value;

") book value of extra listing securities (except the securities emitted by the central executive bodies, National Bank, the Public mortgage institution and local government bodies of Ukraine) which are carried at fair value;

e) book value of securities which do not address on the stock exchanges (including which trade on the stock exchanges is forbidden by the legislation of Ukraine), in trade portfolio of bank;

e) book value of securities of not diversified investment funds.

The paragraph the ninth is excluded according to the Resolution of Board of the National Bank of Ukraine of 30.11.2017 No. 121

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