On September 27, the Cabinet of Ministers of Ukraine approved the draft law “On Amendments to Some of the Laws of Ukraine on the Management Specifics of State-Owned Banks”. The draft law was prepared by the Ministry of Finance jointly with experts from the International Monetary Fund, the European Bank for Reconstruction and Development and the International Finance Corporation.
What’s it about?
According to the draft law, the supervisory board of a state-owned bank shall consist of 7 members. Five of them shall be independent individuals, one member shall be appointed upon request of the President of Ukraine, and the last one shall be appointed by the Cabinet of Ministers.
The draft law sets clear criteria for the independence of the supervisory board members and a procedure for their selection in a transparent contest to be hosted with the participation of an international recruiting company.
State candidates to the supervisory board of state-owned banks shall be examined by a contest commission set up by the Cabinet of Ministers. The commission consists of three representatives of the President of Ukraine and three representatives of the Cabinet of Ministers.
Independent candidates shall be selected in a contest conducted for candidates only who have been pre-selected by the recruiting company in a public procedure. The recruiting company must have at least 10 years of international experience in recruiting management personnel for leading global banks.
Members of the supervisory boards of state-owned banks will receive salaries making it possible to engage professional bank managers. The supervisory boards of state-owned banks shall have committees for audit, risks as well as committees for appointment and remuneration.
The members of the audit committee shall be exclusively the independent members of the supervisory board. The committees for risks, appointment and remuneration shall mainly consist of independent members who shall also chair them.
In this regard, Minister of Finance Oleksandr Danyliuk said: “Today, we have made an important step in the comprehensive reform of state-owned banks aimed to increase their effectiveness and resuming credit-supply activities”.
What are the benefits?
- fundamental changes of the principles and mechanisms of the corporate management at state-owned banks;
- bank management free from politics;
- higher quality of decision-making at state-owned banks;
- corporate management at state-owned banks will be in line with the recommendations of the OECD, the European Commission and Basel Committee for Banking Supervision;
- higher competitiveness and effectiveness of state-owned banks;
- basis for attracting foreign investors to the state-owned banks.