National Bank of Ukraine says it would take 1 year to bring order to non-banking financial market

MOSCOW. Oct 18 (Interfax) - A transition period on the non-banking financial market has been on since July 1, 2020, when the National Bank of Ukraine replaced the State Commission on Regulation of Financial Services as the market regulator, and it would take about a year to put the market in order, National Bank deputy head, Prudential Supervision curator Dmitry Oleinik said.

"At this pace, we will need about a year to bring order to the non-banking financial market. Key changes in non-banking financial institutions are expected next year, when a package of National Bank guidelines and regulations for financial companies, insurers, lessors, pawnshops and credit unions take effect," Oleinik said in an interview with Ukrainian media.

In terms of the supervisory structure, there will be much stricter requirements for compliance, reporting, corporate governance and risk management systems and internal controls, Oleinik said.

"The problem of the non-banking market is the 'low' entry threshold and too liberal requirements. Numerous companies operate on borrowed funds. This creates risks," he said.

A number of members of the European Union, which Ukraine seeks to enter, have minimal capital requirements for non-banking financial institutions at 5 million euros, Oleinik said.

"We are considering the possibility of linking the level of capital to the size of the business. Laws give such powers to the National Bank of Ukraine," he said.

Speaking of the recent adjustment of the structure of the National Bank's prudential oversight, he said the main goal was to concentrate the oversight on the highest risks and to anticipate problems.

Functions of the new department of integrated banking oversight have been reviewed drastically, Oleinik said. "We have established competence centers for every major area of risks and business models. We have implemented a function of enhanced risk analysis. We have combined teams supervising groups of banks with similar business models," he said.

Besides banks, the new department oversees providers of payment services consistent with the new laws, Oleinik said. The changes aim at further deepening of the risk-based approach to oversight and are envisaged with the International Monetary Fund program, he said.