On 16 November 2006, Verkhovna Rada (Ukrainian Parliament) passed the Law of Ukraine No. 358-V "On Amendments to Law of Ukraine "On Banks and Banking Activity" dated 16 November 2006 (the "Amendments") relating to the possibility for foreign banks to open branches in Ukraine. The following a brief summary of the provisions of the Amendments.

The Amendments establish the procedure for, and conditions under which a foreign bank may open a branch or a representative office in Ukraine. The Amendments also specify the grounds upon which the National Bank of Ukraine (the "NBU") will refuse a foreign bank to open its branch or a representative office in Ukraine.

According to the Amendments, a foreign bank would be entitled to open a branch in Ukraine subject to the following conditions:

  1. the country of incorporation of the foreign bank participates in international co-operation in the area of prevention and counteraction of legalization of illegally made profits and also co-operates with FATF;

  2. the banking supervision in the country of incorporation of the foreign bank corresponds to the main principles of effective banking supervision established by the Basel Committee on banking supervision;

  3. the NBU and the banking supervisory authorities in the country of incorporation of the foreign bank enter into an agreement on co-operation in the area of banking supervision;

  4. the minimum amount of the assigned capital (i.e., amount of funds in freely convertible currency granted by the foreign bank to its branch for purposes of its accreditation) of the branch at the moment of its accreditation is not less than EUR10,000,000; and

  5. foreign bank grants a written undertaking that it will unconditionally fulfill the obligations, which arise out of its operations in Ukraine through its branch.

The NBU carries out accreditation of the branch of a foreign bank by making the relevant entry into the State Banks' Register and issuance of the banking license. The branch of the foreign bank may start performing the banking activity only upon its accreditation by the NBU. The NBU takes a decision on accreditation or refuses in accreditation of the branch of the foreign bank within three (3) months from the moment of submission of the documents specified by the Amendments.

The branch of a foreign bank must fulfill all the requirements established under the Banking Law and prescribed by the NBU for Ukrainian commercial banks, including, inter alia, the requirements to the premises of the branch, equipment of the branch, professional compliance and business reputation of the management.

The Amendments will enter into effect as of the date of Ukraine's entry to the World Trade Organization (the "WTO"). However, the Amendments relating to procedure for opening branches and representative offices of foreign banks in Ukraine will become effective from the date of the official publication of the Amendments. At the moment, it is unclear when Ukraine will join the WTO but this is expected to happen in early 2007.

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