The National Bank of Ukraine (NBU) has replaced the existing requirements on the largest amount of credits and guarantees given to one insider (N9) and all insiders (N10) of 5% and 30% respectively with the new single requirement of the largest amount of credit risk for transactions with persons affiliated with banks (N9) of 25%.
The decision is stipulated in NBU resolution No. 312 which was posted on the central bank's website last week. The resolution takes effect on June 14, 2015.
According to the resolution, banks are banned from providing credits to any entity to pay for liabilities by this entity to the entity affiliated with the bank; acquire assets of the entity affiliated with the bank, apart from products made by the entity, securities placed with or signed by the entity affiliated with the bank.
"Banks are banned from carrying out credit transactions with the entities affiliated with the bank indirectly, including the placement of funds in another bank to credit the entities affiliated with the bank by the new bank," reads the resolution.
In addition, the following requirement was introduced: if banks provide credits or guarantees to the individuals or companies affiliated with the bank in the amount exceeding 1% or 3% of their regulatory capital respectively, the decision is to be made by the board of the supervisory board of the bank via a secret ballot, which must pass by two thirds, involving at least half of board members without the participation of the interested person. Previously, this requirement existed only for the issue of credits or guarantees to management personnel in the amount exceeding UAH 120,000.
The NBU also said that on May 12 it approved resolution No. 314 on measures to bring the volumes of active transactions with affiliated entities by banks in line with the requirements. The resolution sets the form of reporting on the volumes of active transactions with entities affiliated with the banks and the terms of submitting the reports to the NBU.
The volume of the transactions and the N9 requirement will be defined for each bank after analyzing the reports. If the requirement is not observed, banks are to submit a plan of measures to bring the indicators in line with the NBU requirements.
Resolution No. 314 foresees the audit of active transactions with affiliated entities at 20 largest banks by Big Four audit firms.
