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1. What does the term “person connected with the bank” mean?

According to Article 52 of the Law of Ukraine "On Banks and Banking Activities", persons related to the bank include:

  • bank controllers;
  • persons who have significant participation in the bank, and persons through whom these persons exercise indirect ownership of significant participation in the bank;
  • heads of the bank, head of the internal audit service, heads and members of the bank's committees;
  • related and affiliated persons* of the bank, including members of the banking group;
  • persons who have significant participation in related and affiliated persons of the bank;
  • heads of legal entities and heads of banks, which are interdependent and affiliated persons of the bank; the head of the internal audit service; the leaders and members of the committees of these persons;
  • associated persons* of individuals specified in clauses 1–6;
  • legal entities in which the individuals specified in this part are managers or owners of substantial participation;
  • any person through whom the operation is carried out in the interests of the persons specified in this part, and who is influenced in the conduct of such an operation by the persons specified in this part through labor, civil and other relations.

* Associated person is a husband or wife, direct relatives of this person (father, mother, children, siblings, grandfather, grandmother, grandchildren), direct relatives of the husband or wife of this person, husband or wife of a direct relative.

* Bank affiliate - any legal entity in which the bank has a significant participation or which has a significant participation in the bank.

* Dependent person - a legal entity that has common owners of substantial participation with the bank.

 

2. Consequences of concluding a contract on non-market terms

According to Article 52 of the Law of Ukraine “On Banks and Banking Activities”, transactions made with persons related to the bank cannot provide for conditions that are not current market conditions.

Market conditions not including, in particular:

  • acceptance of less security for the performance of obligations than is required from other clients;
  • acquisition of property of low quality or at an inflated price from a person related to the bank;
  • making an investment in the securities of a person related to the bank, which the bank would not have made in another company;
  • payment for goods and services of a person connected with the bank at prices higher than usual or in such circumstances when the same goods and services of another person would not have been purchased at all;
  • sale of property to a person related to the bank at a value lower than that which the bank would receive from the sale of such property to another person;
  • accrual of interest and commissions on services provided by the bank to persons related to the bank, which are less than usual;
  • accrual of interest on contributions (deposits) attracted by the bank from persons related to the bank, which are larger than usual.

Agreements concluded by the bank with persons related to the bank on terms that are not current market conditions are invalidated from the moment of their conclusion.

If the transaction is declared invalid, each of the parties is obliged to return to the other party in kind everything that it received in the execution of this transaction, and if such a return is impossible, in particular when the received consists in the use of property, work performed, service rendered, reimburse the cost what was received at the prices that exist at the time of compensation (Article 216 of the Civil Code of Ukraine).

 

3. Restrictions for the bank on transactions with related parties

The bank is prohibited from providing loans to any person for the repayment of any obligations by that person to a person related to the bank; acquisition of assets of a person related to the bank, with the exception of products manufactured by this person; purchase of securities placed or signed by a person related to the bank.

The National Bank of Ukraine exercises control over the operations of banks with persons related to the bank.

The National Bank of Ukraine has the right to establish restrictions on bank transactions with persons related to the bank.

 

4. Consequences for a person related to the bank arising from the classification of a bank as insolvent and the withdrawal of such a bank from the market in accordance with the Law of Ukraine "On the system of guaranteeing deposits of individuals"

According to clauses 4 and 7 of part four of Article 26 of the Law of Ukraine "On the system of guaranteeing deposits of individuals", the Fund for Guaranteeing Deposits of Individuals (hereinafter referred to as the Fund) does not reimburse the deposit in the guaranteed amount of compensation at the expense of the Fund:

  • deposited with a bank by a person who is a person related to the bank or was such a person within a year prior to the day the National Bank made a decision to classify such a bank as insolvent (if the National Bank makes a decision to revoke a banking license and liquidate the bank on the grounds determined by part two of Article 77 of the Law of Ukraine "On Banks and Banking Activities" - within a year prior to the date of such a decision);
  • on deposits in the bank, on which depositors on an individual basis receive interest from the bank under agreements concluded on terms that are not current market conditions in accordance with Article 52 of the Law of Ukraine "On Banks and Banking Activities", or have other financial privileges from the bank .

 

5. Answers to questions that you may have in case of receiving a notification from the bank about the identification of you as a person connected with the bank: 

Do I need to contact the bank if I received a letter of notification stating that I am a person related to the bank?

No, you do not need to contact the bank. The letter was sent to you for informational purposes in pursuance of the requirements of the National Bank of Ukraine.

Why did I receive a letter identifying me as a person related to the bank if I am not a client of the bank and do not have any business relationship with the bank?

You received the letter because you meet the criteria established by the Law of Ukraine "On Banks and Banking Activities" for identifying persons related to the bank and in pursuance of the requirements of the Regulation on determining persons related to the bank, approved by the Resolution of the Board of the National Bank of Ukraine No. 315 dated 12.05.2015.

After identifying me as a person related to the bank, can I use the services of the bank?

The status of a person related to the bank does not restrict the use of the bank's services if the bank provides services on current market conditions.

 

6. Liability of persons connected with the bank

In accordance with Article 58 of the Law of Ukraine "On Banks and Banking Activities", a person associated with the bank for violating the requirements of the legislation, including the regulations of the National Bank, carrying out risky transactions that threaten the interests of depositors or other creditors of the bank, or driving the bank to insolvency, bears civil, administrative and criminal responsibility.

A person related with the bank, whose actions or omissions have led to damage to the bank through his fault, shall be liable with his property. If, as a result of the actions or inaction of a person connected with the bank, the bank is damaged, and another person associated with the bank, as a result of such actions or inaction, directly or indirectly received property benefit, such persons shall be jointly and severally liable for the damage caused to the bank.

Article 1665 of the Code of Ukraine on Administrative Offenses: for violation of banking legislation and regulations of the National Bank of Ukraine by persons connected with the bank, except for violations specified in Article 73 of the Law of Ukraine "On Banks and Banking Activities", including the provision of inaccurate (incomplete) reporting, in particular the quality of assets, conducting transactions with persons related to the bank, the essence of transactions or performing risky transactions that threaten the interests of depositors or other creditors of the bank, provides for the imposition of a fine in the amount according to the violation.

Article 2181 of the Criminal Code of Ukraine: when bringing a bank to insolvency, that is, deliberately, out of selfish motives, other personal interest or in the interests of third parties, any actions associated with the bank that led to the classification of the bank as insolvent, if this caused great material damage* to the state or the creditor, it is punishable by restriction of freedom for a period from one to five years or imprisonment for the same period, with the imposition of a fine from five thousand to ten thousand non-taxable minimum incomes of citizens and deprivation of the right to hold certain positions or engage in certain activities for up to three years.

* Material damage is considered large if it is ten thousand or more times higher than the non-taxable minimum income of citizens.