Draft Law No. 10287 On Amendments to Certain Legislative Acts of Ukraine on Improvement of the System Guarantee of Individuals Deposits and Withdrawal of Bankrupt Banks from the Market was registered on 14 May. How can this draft influence the position of depositors who are individuals, as well as banks?

Draft Law No. 10287 was developed with the aim of stepping up protection of the rights of depositors who are individuals by preventing an unreasonable reduction in the value of assets of insolvent banks. Also, the procedure for the disposal of bank assets is improving, as is the prevention of improper use of procedural rights. Therefore, a number of laws are being reshaped, some of which are listed below.

Thus, the proposed changes to the Law On Enforcement Proceedings is that during the execution of enforcement proceeding by which the bank acts as an execution creditor, classified as insolvent, and the bank is being liquidated, the executor is obliged to involve the Estimator defined by the Deposit Guarantee Fund (Fund). The procedure for selling the property is also determined by the Fund.

Also, according to the Draft On Restoring the Debtor’s Solvency or Recognizing it as Bankrupt, the valuation of property, the creditor of which is one of the above-mentioned banks, is carried out with the Estimator’s involvement, who is determined by the Fund. The sale of the property is carried out in accordance with the Law On the System Guarantee of Individuals Deposits and the Fund’s acts.

In addition, the Law On the System Guarantee of Individuals Deposits is expected to include funds received from the Fund’s property management (including on alienation, lease, etc.) and from the management of bad debts of state banks and banks in which the state has a shareholding. Moreover, the procedure for the management of such a bad debt is also specified.

Thus, these changes should increase the amount of proceeds raised from the sale of assets of insolvent banks and, as a consequence, increase the amount of payments to a depositor. Lastly, the level of confidence of depositors in the banking system will grow.

Kateryna Breduliak, senior associate, banking and finance, exclusively for The Ukrainian Journal of Business Law.