Sanctioned systemically important banks will be phased out of the market

The Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine to Improve the Procedure for Withdrawing a Bank from the Market in Conditions of Martial Law" (No. 3111-IX) entered into force on May 29, 2023.

These amendments introduce new paragraphs 15 and 16 of Section VII "Final Provisions" of the Law of Ukraine "On Banks and Banking Activity." According to these provisions, during the state of martial law in Ukraine, in case of sanctions imposed by foreign states (excluding states engaged in armed aggression against Ukraine) or international organizations due to threats to the interests of depositors, creditors, and stability of the banking system, the National Bank of Ukraine shall make a decision to withdraw a systemically important bank from the market as determined by the National Bank of Ukraine.

In the event of such a decision, the systemically important bank is withdrawn from the market in accordance with the procedure prescribed by the Law of Ukraine "On the System of Guaranteeing Deposits of Individuals," taking into account the specificities defined in its respective section.

An individual who has suffered damages as a result of the withdrawal of a systemically important bank from the market under the aforementioned provisions has the right to compensation for the incurred losses in accordance with international law at the expense of the state(s) that have committed aggression against Ukraine. Satisfaction of the creditors' claims against the bank is carried out in accordance with the Law of Ukraine "On the System of Guaranteeing Deposits of Individuals."

Furthermore, it is prohibited to acquire or increase substantial participation in a bank by individuals who have been subjected to sanctions by foreign states (except for states engaged in armed aggression against Ukraine) or international organizations in accordance with the Law of Ukraine "On Sanctions."