• Description

    Finance and investments

    Financial System of Ukraine

    The state financial system is a complex of financial institutions, which favour the formation and use of centralised and decentralised monetary funds for the benefit of state financial activity.

    In particular, the financial system of Ukraine governed by the following legislative acts:

    • The Law of Ukraine “On Financial Services and State Regulation of Financial Services Market” dated 12 July 2007;
    • Decree of the Cabinet of Ministers of Ukraine «On the System of Currency Regulation and Currency Control” dated 19 February 1993.

    Under the Law of Ukraine  “On Financial Services and State Regulation of Financial Services Market”, financial services (including issue of payment documents and charge cards; currency exchange; financial leasing; insurance and guarantee arrangements; credit arrangements and factoring) can be rendered by financial institutions only.

    A financial institution is a legal entity that entered the appropriate register and renders one or several financial services. Financial establishments include banks, credit unions, pawnshops, leasing companies, trust institutions, insurance companies, pension provision funds, investment funds and companies and other legal entities; their exclusive activity is rendering of financial services.

    Banking Sector

    The principal legislative acts that govern banking activities are the following:

    • The Law of Ukraine “On Banks and Banking” dated 07 December 2000;
    • The Law of Ukraine “On the National Bank of Ukraine” dated 20 May 1999;
    • The Law of Ukraine “On the Procedure of Settlement in Foreign Currency” dated 23 September 1994;
    • Regulation of the Directors of the National Bank of Ukraine “On Adoption of the Instructions on Non-Cash Transactions in Ukraine in National Currency” dated 21 January 2004.

    Under the Law of Ukraine “On the National Bank of Ukraine”, the National Bank of Ukraine (hereinafter referred to as the “NBU”) is the central bank of Ukraine, a central state authority with a special legal status, tasks, functions, authority and organisation principles.

    Among the main NBU functions, in particular, the following are envisaged:

    • Development of monetary policy;
    • Emission and turnover of national currency – hryvna;
    • Settlement of the accounting rules for banking transactions, as well as information, assets and property security rules for banks;
    • Issue of licences for banking activity;
    • Bank regulation and supervision.

    The Law of Ukraine “On the National Bank of Ukraine” stipulates principle definitions in the sphere of banking law, namely, NBU rate, NBU official rate, NBU refinancing rate, treasury obligations, balance of payments etc.

    Under the Law of Ukraine “On Banks and Banking”, banks in Ukraine can be established in the form of a public company or a cooperative bank only. Individuals and legal entities, residents and non-residents, as well as the state through the person of the Cabinet of Ministers of Ukraine or its authorised bodies are allowed to be participants to the bank.

    State bank registration is a mandatory procedure carried out by the NBU. Minimum initial registered capital as of the bank registration date should be no less than UAH 75 mln. The bank is authorised to carry out banking activity only on the receipt of the banking licence issued by the NBU. It is forbidden to carry out simultaneous activities on the mobilization of investment and other funds subject to repayment, as well as issue of credits and transactions without obtaining the banking licence.

    The Law of Ukraine “On the Procedure of Settlement In Foreign Currency” provides that, the income of residents in foreign currency are to be credited to their accounts in authorized banks before the deadline for the payment of arrearages stipulated by the agreements, but not later than within 180 calendar days of the customs clearance date (statement of exporting cargo customs declaration) for exported goods, and in the event of works (services) or intellectual property rights export – upon signature of the act or any other document that certifies execution of works, rendering of services or export of intellectual property rights. If the deadline is missed, they need a conclusion of central executive authority on economic policy.

    Insurance

    Under the Law of Ukraine “On Financial Services and State Regulation of Financial Services Market” dated 12 July 2001, insurance is a financial service that can be rendered by financial institutions only.

    Under the Law of Ukraine “On insurance” dated 07 March 1996, insurance activities on the territory of Ukraine can be carried out by financial institutions, which were established in the form of a stock company, general or special partnerships or additional liability company on duly receipt of the licence for the insurance activity. 

    There should be no less than three participants to the insurer. Minimum initial registered capital equal to EUR 1 mln is established for the insurer who works with other kinds of insurance rather than life assurance; and for the insurer who works in life assurance, the sum equals EUR 1.5 mln according to the Ukrainian currency exchange rate.

    Investment Activity

    According to the Law of Ukraine “On Investment Activity” dated 18 September 1991, investment is all kinds of property and intellectual values, that are allocated into the objects of entrepreneurial and other activities, as a result of which profits (income) are made or certain social effect is achieved.

    Ukrainian and foreign individuals and legal entities, foreign states as well as all the above-mentioned subjects can be engaged into investment activity either separately or by joint efforts.

    Any property, including capital assets and turnover assets in many branches and spheres of economics, stock, special-purpose monetary contributions, scientific and technical production, intellectual values, other property, as well as property rights can be investment activity objects.

    Under the Law of Ukraine “On Investment Activity”, investment activity can be carried out at the expense of:

    • own financial resources;
    • borrowed financial assets of investor;
    • involved financial assets of investor;
    • budget investment allocations;
    • non-repayable and charity contributions and endowments of organisations, enterprises and individuals.

    The investment relationships are also regulated by the Law of Ukraine “On Protection of Foreign Investments in Ukraine” dated 10 September 1991 and The Law of Ukraine “On the Regime of Foreign Investments” dated 19 March 1996.

    In particular, the Law of Ukraine “On the Amendments to Certain Legislative Acts of Ukraine Regarding Stimulation of Foreign Investment and Crediting” introduced amendments to the Law of Ukraine “On the Regime of Foreign Investments”, under which the procedure of mandatory state registration of foreign investments was cancelled. At the same time it should be noted, that in case state registration of foreign investments is absent, the investor will be disentitled to the benefits and guarantees envisaged by the legislation.