L&M Finance Group


The National Bank published the White Paper "The Future of Regulation of the Credit Market by Financial Companies". This is the third of six planned sectoral documents in which the National Bank as the future regulator of non-banking financial services markets describes the current state of the markets, their problems and planned changes in regulation.
Starting July 1, 2020, the National Bank of Ukraine will carry out state regulation and supervision of financial companies that provide loans. According to the data provided by the NBU, by the end of 2019, 684 financial companies were operating in the Ukrainian non-bank credit market. Over the past year, contracts for a total of UAH 79.2 billion were concluded on this market, which is 52.5% higher than the same indicator in 2018. Such market activity requires the future regulator to quickly resolve existing systemic problems that impede its more active development, as well as negatively affect the rights of customers.
Among the market problems, the NBU draws attention to the following:
  1. Licensing issues;
  2. Lack of clear regulation of the issue of funding sources;
  3. Violation of the rights of consumers of financial services;
  4. The high cost of borrowing and the low level of financial literacy of borrowers;
  5. Inadequate level of protection of personal data of consumers;
  6. Identification of customers during the remote conclusion of loan agreements;
  7. Violations in the process of resolving bad debts.
The new system of regulation and supervision will include:
  1. Mandatory availability of a business plan, which will be the main document for obtaining a license;
  2. New opportunities - expanding access to financing from third parties and allowing financial companies to carry out activities other than providing financial services;
  3. Transparency and impeccable business reputation - only those financial companies whose owners and ultimate beneficiaries are disclosed will act on the market. Only owners and managers with an impeccable business reputation will be allowed on the market;
  4. Solvency - the requirement for the capital of a financial company will provide access to the market for financially wealthy players, the stability of financial companies, and will make it impossible to work on the market of companies that are insolvent.
  5. High-quality reporting - financial companies compile and submit reports according to updated standards;
A model of future market regulation will provide:
  1. The right to raise funds: from participants (shareholders) and affiliates of a financial company; from other financial service providers, as well as international financial organizations; on the terms of subordinated debt from qualified investors, including those who are not financial institutions; by placing equity debt securities.
  2. The obligation to provide a business plan that confirms that the founder has sufficient own resources or can attract additional resources to implement the selected business model, confirm the applicant’s ability to achieve the planned volume of clients, income and other goals.
  3. The obligation of financial companies to maintain capital at the level of 3 million UAH. in case of providing only credit services, or UAH 5 million, if the financial company plans to provide two or more financial services.
It is reported that the National Bank will oversee the activities of financial companies in the form of remote supervision and inspection checks.
According to the NBU, the new regulation will open new opportunities for attracting financing for a financial company, providing additional services to customers, will allow it to carry out activities other than providing financial services, and will also simplify the procedure for obtaining licenses.