What does the term the “party related to the bank” mean?

Parties of the bank

Pursuant to Article 52 of the Law of Ukraine “On Banks and Banking”, related parties of the bank include:

1. bank controllers;
2. persons owning a qualifying holding in the bank, and persons through whom the said persons exercise indirect ownership of a qualifying holding in the Bank;
3. managers of the Bank, head of the Internal Audit Division, Chief Risk Officer, Chief Compliance Officer, heads and members of committees of the Management Board and the Supervisory Board;
4. allied and affiliated parties of the Bank, including members of the banking group;
5. owners of a qualifying holding in allied and affiliated parties of the Bank;
6. managers of legal entities and managers of banks being allied and affiliated parties of the Bank, managers of the internal audit unit, managers and members of the committees of these persons;
7. associated persons of individuals stated in paragraphs 1–6 of this Section;
8. entities in which the individuals stated in this Section are managers or owners of a qualifying holding;
9. Any entity, through which a transaction is performed in the interests of the persons referred to in the paragraphs 1–8.

Is it necessary to contact the bank in case of receiving a letter/notification on recognition as the related party of the bank?

No, the letter/notification does not require any actions from the recipient.

Why is a person sent a letter/notification recognizing him/her as the related party of the bank if the person is not a bank client?

A bank defines the related parties of the bank pursuant to the criteria stipulated by the current legislation of Ukraine regardless whether the person has relations with a bank or not.

What are the restrictions stipulated by law on bank transactions with the persons recognized as the related parties of the bank?

Article 52 of the Law of Ukraine “On Banks and Banking” defines:

• The agreements entered into with the related parties of the bank shall not be based on conditions other than current market conditions;
• The agreements between a bank and its related parties, should they contain other conditions than current market conditions, shall be declared void from the date of agreement.

The following conditions shall not be deemed current market conditions:

• Acceptance of collateral that is of a lower value than that required from other clients;
• Purchase of low-quality property or property at a higher price from a related party;
• Investment in securities of a related party that the bank would not make in securities of other party;
• Payment for goods or services from a related party at a price higher than usual, or under the circumstances when the goods or services would never be procured from other party;
• Sale to a bank’s related party of the property that is of a lower value than the property which would have been received by the bank from the sale of such property to another party;
• Accrual of the lower than usual interest rates and commission fees for services provided to the related parties by the bank;
• Accrual of the bigger than usual interests on deposits raised by the bank from the related parties;
• Assignment for use of property to a bank’s related party with payments lower than what the bank would receive from a person (party) which is not related or getting assignment for use of property from a related party with a higher payment amount.

May a person, after he/she is recognized as the related party of the bank, receive bank services?

If a person is recognized as the related party of the bank, he/she is not restricted in using bank services if the bank provides its services on current market conditions (e.g., interest rate, amount of a commission fee, term of use, collateral requirements, etc. comply with the standard conditions for bank products).

However, during wartime, the National Bank of Ukraine set certain restrictions.

What are the restrictions on bank transactions with the persons recognized as the related parties of the bank during martial law?

Pursuant to the NBU Board Resolution No. 23 as of February 25, 2022, banks are prohibited from:

1. Performing active transactions with the related parties of the bank in terms of concluding new loan agreements and agreements on the bank’s provision of financial commitments, concluding contracts on making amendments to loan agreements in the respect of the following:
   • increasing the sums of loans and financial commitments;
   • Extending the terms for using loans (excluding the loan agreements offering the standard terms for a wide range of borrowers).

2. Early refunds of deposits to the related parties of the bank, except for directing early repaid funds to increase the bank's capital.

When a person, who is recognized as the related party of the bank, may refund or partially withdraw funds from deposits during wartime?

During wartime banks cannot refund deposits early to the related parties of the bank. Funds as well cannot be partially withdrawn from a deposit until the deposit term is due. Deposits can be refunded only within the periods specified in the contract such as the term for the deposit closure.