Facebook Pixel

Financial companies have two years to adapt to the new work system: What will change

A new law on the regulation of the financial services market has been passed. Photo: finservices.com.ua A new law on the regulation of the financial services market has been passed. Photo: finservices.com.ua

A new law on the regulation of the financial services market has been passed. Photo: finservices.com.ua A new law on the regulation of the financial services market has been passed. Photo: finservices.com.ua

On December 14, the Verkhovna Rada passed in the second reading and as a whole the law "On Financial Services and Financial Companies" (bill No. 5065). As noted by Kateryna Rozhkova, the First Deputy Governor of the National Bank, it establishes transparent principles of work and requirements that are uniform for the entire financial sector. Also, clear rules are being imposed for the operation of financial companies and pawnshops, including with regard to their clients’ rights protection. "Because this issue raised some questions from us as a regulator," Rozhkova commented.

The law comes into force on January 1, 2024.

Key innovations in the law on financial services

The concept of "financial service secrecy" is introduced as a simplified analogue of bank secrecy, and a regime for its protection and disclosure is established.

Financial (insurance, crediting, leasing, payments) and accompanying (intermediary) services are delineated, the regulation of the latter is simplified.

Proportional requirements to the minimum capital are introduced depending on the services provided. The capital should be from 1 million UAH for pawnshops providing exclusively lending services to 10 million UAH for financial companies providing guarantee services.

Acquisition of a substantial shareholding in a financial company or pawnshop will no longer require prior approval from the regulator (NBU). However, the National Bank will continue to check the owner's compliance with the legal requirements.

Risk-oriented regulation and supervision are introduced. That is, the requirements and rules for supervising financial institutions will depend on their size, type of activity, significance, and risks. There will also be a supervision of the institutions’ market behavior. This refers to strengthening control over compliance by financial institutions with requirements for consumer protection, disclosure of sufficient information, transparency of ownership structures, proper business reputation of the owners and managers, etc.

The process of entering the market of financial companies and pawnshops and obtaining licenses by them is simplified. The current procedure for registering a company as a financial institution is canceled. The obtaining of the financial institution status by the company and its inclusion in the corresponding register will be carried out simultaneously with the license issuance. Financial companies and pawnshops will get only one license with a list of financial services that they are entitled to provide. The scope of the obtained license can be expanded (if necessary). There are more opportunities to combine the types of financial services that can be provided by the company. For example, the pawnshops will be able to provide separate payment services and trade currency values in cash. The so-called exceptional type of activity will disappear. As a result, financial companies and pawnshops will be able not only to provide financial services, but also to carry out other economic activities.

Taking into account the risk-based approach, the requirements for the corporate governance of financial companies are being updated and the requirements for the internal control system are established.

Financial companies and pawnshops, if they are not enterprises of public interest, may outsource a number of their own functions. Namely: accounting, internal audit, risk management, and compliance. They are obliged to inform the National Bank of such a transfer.

The public interest enterprises are the issuers of securities, insurers, non-state pension funds and other financial institutions and enterprises classified as major in terms of book value of assets, net income, and number of employees.

The NBU will be able to apply corrective and early intervention measures to financial service providers in order to prevent violations.

The National Bank became entitled to create a regulatory platform for testing innovative services, technologies, and instruments in the financial services markets.

Comments

All News