Enforcement Of Resolution On Appointment Of The Interim Administration
The State Committee for Regulating the Financial Services Markets of Ukraine ("SCRFSM") prepared a draft law on amending the Law of Ukraine "On Execution Proceedings". The amendments prepared by the SCRSFM are aimed at the improvement of the mechanism for the appointment of interim administrations in financial institutions. Specifically, the suggested draft law extends the list of execution documents by adding additional document whereby the State Execution Service ("SES") may initiate execution proceedings, which is the resolution of SCRFSM on the suspension of the financial institution's officials and the appointment of an interim administration.
Although at the present stage the SCRFSM is vested with a statutory authority to appoint interim administration in financial institutions, the enforcement of such resolution, should a financial institution refuse to voluntarily fulfill it, may appear difficult for the SCRFSM. The Law of Ukraine "On Execution Proceedings" does not stipulate such resolution as a legal ground for the SES to initiate the execution proceedings. The draft law suggested by the SCRFSM is aimed at eliminating the aforesaid discrepancy and enabling enforcement of the resolutions of the SCRFSM by the SES.
According to Mr. Grigorenko, Deputy Head of SCRFSM, the appointment of interim administrations is a measure which is indeed necessary. Moreover, the SCRFSM is currently considering the introduction of a mechanism to transfer the insurance portfolio of the insurance companies experiencing financial difficulties to the ones which may effectively fulfill obligations under insurance agreements.
Cancelation of additional reporting obligations of insurance companies
The SCRFSM repealed its Resolution "On Interim Measures on Monitoring of the Financial Situation of the Insurance Companies", dated 4 December 2008, whereby the insurance companies were obliged to provide their monthly reports on financial performance results to the SCRFSM. The Resolution was adopted by the SCRFSM for the purpose of monitoring the influence of the financial crisis on the insurance companies; however, the experts presume that it caused additional tension on the market and certain complications to the insurance companies; therefore, its repeal was taken positively.
New draft law aimed at mitigating the influence of the financial crisis on the insurance market
The new draft law submitted to the Parliament provides for extending the competence of the SCRFSM, including, inter alia, entitling the SCRFSM to change solvency requirements, structure and manner for calculating the reserves; granting the SCRFSM authority to require of the insurance companies to restore the insurance market conditions and to increase the reserves, if the SCRFSM discovers that the insurance rates of the company substantially differ from the market ones. Such measure is aimed at limiting the possibility of dumping on the insurance market to which the insurance companies may resort under the conditions of recession.
In order to resolve the problem of withdrawal of funds from the accounts opened with banks which refuse to return deposits due to financial problems, the draft law provides for a mechanism of a withdrawal of such funds by the insurance companies after the latter have fi led the respective request with the SCRFSM; it is planned that the SCRFSM, is to apply, in its turn, to the National Bank of Ukraine ("NBU"), seeking financing for the respective bank in an amount required to return the insurance company's deposited funds.
The draft law also stipulates the possibility of the NBU providing financing to the insurance companies facing solvency problems, through Ukrainian banks.
Another new rule introduced by the draft law is imposing on the insurance companies the obligation to provide funds for activities of the SCRFSM; to this end, the insurance companies are to pay 0.01% of the insurance payments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.