Taras Miroshnychenko

Head of practice

E-mail

miroshnychenko@prikhodko.com.ua

Phone numbers

Head of Corporate Law and Fintech Practice. Expert in the creation and reorganization of companies, support of M&A transactions, as well as legal support for opening and running a business in the EU, Asia, and North America.

Bank liquidation

Bank liquidation is carried out in accordance with the Law “On Banks and Banking Activities” and the Law “On the Deposit Guarantee System of Individuals”. The procedure for terminating a bank’s activities is complicated by dual control by the NBU and the Deposit Guarantee Fund of Individuals, the completion of all operations (including satisfying depositors’ claims). In general, everything starts with the revocation of the banking license and ends with the introduction of appropriate changes to the Unified State Register. More information is available in this article.

Criteria for bank insolvency as grounds for its liquidation: what do you need to know?

Bank liquidation

The National Bank has clear legislative grounds for recognizing a banking institution as problematic. According to Article 75 of the Law of Ukraine No. 2121-III, a bank is recognized as problematic if it:

violated capital adequacy standards (at least twice during the last month);
violated liquidity standards (5 or more times – for standards calculated daily, 1 time – for standards calculated monthly);
systematically submitted false information (in order to hide its real financial condition).

In the cases indicated above, the bank is subject to forced liquidation. However, there are also cases when the bank conducts such a procedure at the initiative of management. We will discuss this case in more detail below.

Get legal advice

What functions do the National Bank and the Deposit Guarantee Fund of Individuals share for the liquidation of a bank?

It is worth emphasizing that the NBU plays the role of a regulator for the withdrawal of a banking institution from the market, and the Deposit Guarantee Fund plays the role of a liquidator. If in the first case, only a decision is made to revoke the banking license and terminate the bank’s activities and its official publication on its website, then in the second case the main procedure takes place. It involves:

replacement of all management bodies of the institution (for its full liquidation);
collection of receivables;
drawing up a register of accepted creditors’ claims;
approval of the liquidation balance sheet and report on the implementation of the procedure;
submission of documents for making an entry on termination in the unified state register.

It will also be useful: Liquidation of a legal entity. How to liquidate the enterprise?

Liquidation of a bank by decision of the owner: what does the entire procedure look like according to the law?

The main condition for the start of voluntary liquidation is the solvency of the banking institution and the decision of the owner. The owners have the right to begin liquidation only after the National Bank has given its consent and after checking whether the bank has any signs of problems. This is followed by:

announcement of liquidation (the Deposit Guarantee Fund of Individuals shall place the relevant information on its official website no later than the next business day and shall publish the information in the newspaper “Government Courier” or “Voice of Ukraine” no later than a week later);
statement of creditors’ claims and their fulfillment by the bank. It is worth emphasizing that creditors have the right to state their claims only within 30 days from the date of official publication of the announcement;
inventory and valuation of property (assets). This stage is necessary for the formation of the liquidation estate, which includes movable and immovable property, funds, property rights, and receivables of the relevant banking institution;
settlements with creditors in accordance with the priority established by law;
approval of the liquidation balance sheet;
adoption of the relevant decision of the NBU (its publication on the official website) and exclusion of the bank from the unified state register.

Satisfaction of the claims of the bank’s creditors during its liquidation: what is the basic procedure?

This procedure includes two parallel processes: payment of the guaranteed amount (in the amount of the total amount of deposits, including interest, but not more than 200,000 hryvnias for the period of martial law) and satisfaction of the remaining claims through the sale of property. In order to track the specified process, the Deposit Guarantee Fund for Individuals forms a register of accepted claims of creditors, determines the amounts and assigns the claims to a certain queue. As a general rule, the repayment priority is as follows:

first queue – obligations that arose as a result of causing harm to life and health;
second queue – monetary claims for the wages of employees of the banking institution;
third queue – claims of the Fund itself that arose as a result of liquidation;
fourth queue – claims of depositors in the part that exceeds the amount paid by law (200,000 hryvnias);
fifth queue – claims of the NBU;
sixth row — claims of individuals whose payments (or accounts) were blocked;
seventh row — subordinated debt.

Find out the cost of legal support

How can a corporate lawyer help with bank liquidation in Ukraine?

Although the direct management of the bank liquidation process is carried out by the two state institutions mentioned above, a corporate lawyer can play an important role at the preparatory stage and in the context of representing the interests of owners or creditors. Therefore, his main services to interested clients will include:

Bank liquidation

Criteria for bank insolvency as grounds for its liquidation: what do you need to know?

What functions do the National Bank and the Deposit Guarantee Fund of Individuals share for the liquidation of a bank?

Liquidation of a bank by decision of the owner: what does the entire procedure look like according to the law?

Satisfaction of the claims of the bank’s creditors during its liquidation: what is the basic procedure?

How can a corporate lawyer help with bank liquidation in Ukraine?

You may also need:

Andrey Prikhodko