Development of Ukrainian Banking System in 2006

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Development of Ukrainian Banking Systemin 2006
Olexandr Kirieiev, Executive Director of Banking
RegulationAnd SupervisionThe National Bank of
Ukraine
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Main Legislative Acts that Regulatethe Banking
System Activity

• Laws of Ukraine
• On Banks and Banking
• On the National Bank of Ukraine
• On Economic Entities
• On Individuals Deposit Guarantee Fund
• On Securities and Stock Market
• On Prevention and Counteraction of Legalization
  (Laundering) of Earnings Received from Criminal
  Activities
• On Ensuring Creditors Claims and Lien
  Registration
• On Mortgage
• On Mortgage Lending, Operations with
  Consolidated Mortgage Debt and Mortgage
  Certificates
• On Mortgage Bonds
• On Organization of Forming and Circulation of
  Credit Histories

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General Characteristic
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The Number of the Ukrainian Banks (as of January
01, 2007)

• The number of banks registered in the State
  Register of Banks 193
• The number of banks with banking licenses 170
• The number of banks with foreign capital 35,
  including 13 ones with 100 foreign capital

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Macroeconomic Situation and the Banking System
(as of December 01, 2006)

• Banks assets to GDP ratio 66
• Credit portfolio/GDP 54
• Banks liabilities/GDP 58
• Individuals deposits/GDP 20,5
• Capital/GDP 8

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Dynamics of the Main Banking System Indicators to
GDP
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The Main Indicators of Ukrainian Banks Activity
(as of January 01, 2007)

• Assets 340 billion UAH ( 51 billion Euro)
• Credit portfolio -270 billion UAH (40.6 billion
  Euro)
• Banks liabilities 298 billion UAH (45 billion
  Euro)
• Funds of economic agents 77 billion UAH (11.6
  billion Euro)
• Deposits of individuals 106 billion UAH (16
  billion Euro)
• Regulatory capital 41 billion UAH (6.2 billion
  Euro)

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Dynamics of assets and credit operationsof
Ukrainian banking System
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The Structure of Credit Operationsof Ukrainian
Banking System(as of 01.01.2007, )
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Dynamics of credits granted by Ukrainian banks
(in the national and foreign currency)
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Dynamics of Liabilities, Funds of Economic Agents
and Individual Deposits
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Dynamics of Individuals Deposits in Ukrainian
Banks
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Dynamics of the Regulatory Capital and Capital
Adequacy Ratio of Ukrainian Banks
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(No Transcript)
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Foreign capital participationin Ukrainian
banking system
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Share of Foreign Capitalin the Total Amount of
Foreign Capital of Banksin the context of
countries ()
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Main Achievements in the Development of Effective
Banking Supervision

• Full or significant compliance with the majority
  of Basle Core Principles (23 of 30)
• Transition to risk-based supervision in process
• Early warning system is functioning
• Audit of banks financial reporting is conducted
  in accordance with International Standards of
  Audit
• Introduction of IAS/IFRS
• Prevention of money-laundering is based on FATF
  Recommendations and international principles

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Measures Taken to Increase Capitalization Level

• Capital adequacy ratio increased from 8 to 10
• Accrued but not received income is excluded from
  the regulatory capital calculation
• Changes to the core capital components
  undistributed profit of previous years and that
  of the reporting year which is to be approved are
  included into the supplementary capital
• Increased minimum capital requirements to conduct
  certain bank operations
• More strict requirements on inclusion of fixed
  assets revaluation results into the regulatory
  capital

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Changes in the Legislative BaseIntroduced in 2006

• Changes to the Law of Ukraine On Banks and
  Banking regarding the form of banks
  establishment (OJSC) and increase of the minimum
  authorized capital necessary for a bank
  registration up to 10 million Euro.
• Changes to the Law of Ukraine On Bank and
  Banking which provided for the right of foreign
  banks to open branches on the territory of
  Ukraine.
• Law of Ukraine On Introducing Changes to Certain
  Laws of Ukraine Concerning the Improvement of
  Legal Regulation of the International Cooperation
  in the Area of Terrorism Financing Prevention
  (effective from January 1, 2006).

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Legislative Acts under Consideration ofVerkhovna
Rada of Ukraine

• 1. Draft law on introduction of changes to
  certain Laws of Ukraine (with regard to the
  regulation of banks activities) which envisages
  the following
• Improvement of banks state registration
  procedure
• Determination of beneficial owners of banks
• Peculiarities of conducting audit examinations of
  banks as well as enhancement of cooperation
  between supervisory bodies and external auditors
  of banks
• Cancellation of privileges for connected parties
  while concluding the agreements on bank services
• Improvement of internal financial monitoring
  procedures in banks to prevent using them for
  money laundering purposes.
• (This Draft law has passed the first reading in
  January 2007).
• 2. Draft law on introduction of changes to
  certain Laws of Ukraine aimed at strengthening
  the role of Individuals Deposit Guarantee Fund in
  the development of the banking system.

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Draft Laws to be submittedto Verkhovna Rada of
Ukraine

• Draft Law on introduction of changes to the Law
  of Ukraine On Banks and Banking aimed at the
  improvement of corporate governance in banks
• Draft Law on introduction of changes to the Law
  of Ukraine On Banks and Banking aimed at the
  development of consolidated supervision.

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Tasks of the National Bank of Ukraineon the Way
of Further Development of Ukrainian Banking System

• Increase of banks capital concentration and
  improvement of its quality
• Improvement of corporate governance and risk
  management systems in Ukrainian banks
• Enhancement of banking system transparency
• Further improvement of banking supervision by
  means of introducing the risk-based supervision
• Strengthening of control over the related parties
  transactions
• Introduction of supervision on consolidated basis