05.04.2022 Press Release
The Deposit Guarantee Fund (DGF) welcomes the adoption by the Verkhovna Rada of Ukraine (the Parliament of Ukraine) of draft law No. 5542-1 ‘On Amendments to Certain Laws of Ukraine on Ensuring Stability of the Household Deposit Guarantee Scheme’ as amended. The draft law aimed at increasing depositors’ confidence in the banking system and ensuring its stability is of the highest priority for the financial sector of Ukraine. It addresses a number of key issues, particularly:
The Law promotes the implementation of the President’s initiative to introduce a 100% state guarantee for bank deposits for the period of martial law and three months following its termination or cancellation.
During this period, the DGF will reimburse each depositor in full, including interest accrued at the end of the day before the date when the bank resolution procedure was launched, except as provided in Part IV of Article 26 of the Law of Ukraine ‘On the Household Deposit Guarantee Scheme’.
This rule shall apply to the banks, which will be resolved after the entry into force of this Law.
Three months after the termination or cancellation of martial law, the guaranteed amount of reimbursement will be at least UAH 600,000.
This provision will apply to the banks declared insolvent after the entry into force of these rules.
The state owned Oschadbank becomes the member of the DGF.
Oschadbank’s participation in the DGF introduces equal completion conditions for all banks in Ukraine. This is in line with the international standards providing for mandatory participation of all deposit taking credit institutions in the guarantee system, as well as opens up new opportunities for Oschadbank to attract investment from the European Bank for Reconstruction and Development.
Oschadbank’s participation in the DGF was enshrined in the legislation back in 2001, in the Final provisions of the Law ‘On the Household Deposit Guarantee Scheme’.
The financial stability of the DGF will be increased due to the restructuring of the debt to the Ministry of Finance of Ukraine.
Implementation of the preceding paragraphs became possible due to the restructuring of the DGF’s debt, which is also provided for by the adopted amendments to the Law. Arrears in the face value of the bills will be cleared by the DGF, whereas the accrued interest will be borne from the funds collected from the former owners of the banks and related parties whose activities have led to the insolvency of these institutions.
The Law will enter into force after signing by the President of Ukraine and its official promulgation.
‘All our actions today are aimed at solving operational tasks and safeguarding our future activities. It is reaffirmed by the adoption of this Law. On one hand, the Law introduces the 100% state guarantee for bank deposits for the period of martial law, which is extremely important for maintaining the stability of the banking system today. On the other hand, it lays the foundation for a qualitative transformation of the banking system in the future, when the peace will be restored,’ – said Svitlana Rekrut, Managing Director of the DGF.
Ref.: As of March 1, 2022, the DGF paid out UAH 95.7 billion to depositors of insolvent banks.
During 2014-2016, the DGF borrowed funds totaling almost UAH 80 billion from the Ministry of Finance and the National Bank of Ukraine to ensure the pay out of the covered deposits.. The cost of borrowing ranged from 9.99 to 14%.
As of today, the DGF has fully settled with the NBU, paying UAH 25.6 billion, of which UAH 5.5 billion comprised accrued interest. It also transferred UAH 21.7 billion to the Ministry of Finance (including early payments), of which UAH 7.9 billion was represented by accrued interest. The balance of the DGF’s debt is UAH 108.3 billion – UAH 45.7 billion at face value of the bills, for which the DGF must pay UAH 62.5 billion in interest by the end of 2031.