Non-banking financial institutions of Ukraine in January-June 2018 paid profit tax in the amount of UAH 353.9 million to the national and local budgets, which is UAH 148.4 million or 72.2% more than a year ago, a member of the national commission for financial service markets regulation of Ukraine Oleksandr Zaletov has told Interfax-Ukraine.
“The aggregate amount of the paid profit tax by non-banking financial institutions, according to the Treasury, exceeded the similar indicator of banks by 8.7%, or UAH 28.2 million,” he said.
He also said that the upward pace of fiscal revenues is associated with the growth of services provided by non-banking financial institutions.
In the first quarter of 2018, the following financial services were most popular: third-party liability insurance (94.7% increase), financial leasing (76.2%), pension contributions to private pension funds from individuals (34%), life insurance (30.6%), tourist insurance (26.8%), contributions to the construction financing funds (23.3%), medical insurance (21.7%), car insurance (20.9%), deposits in credit unions (14.7%) and loans granted by credit unions (7.3%).
In Zaletov’s opinion, if several years ago the driver of growth in non-banking financial markets was financial risk insurance and factoring, now growth is primarily related to the activation of financial services oriented to the social needs of the population. The further development of this segment will depend on the adoption of bill No. 8415 dated May 25, 2018 amending some laws of Ukraine regarding state regulation of financial services markets aimed at creating a systemic basis for the recovery and development of non-banking financial services markets in modern conditions.
A new bill amending some laws regarding the public regulation of financial service market (No. 8415) would not reduce the number of fair market players, but it would expand powers of the national commission for financial service markets regulation, according to lawyers polled by Interfax-Ukraine.
“The non-banking financial market, which actual neglect is currently at some stage discrediting the NBU’s impressive work on streamlining and cleaning up the banking sector, will obtain a regulator with the stronger powers in the person of the national commission for financial service markets regulation,” Adviser to the Asters law firm Diana Holanova said.
“At the same time, the situation that has developed in the financial market certainly requires taking measures to clean it up, bringing its participants to European standards. The reduction of participants cannot affect the financial market negatively on the condition that this reduction will be carried out with the aim of identifying the structures of owners of commercial banks and taking adequate measures, insolvent insurance companies and other participants, creating risks for consumers of financial services and financial markets in general,” she said, adding that “not all the provisions of the bill guarantee the neutrality of possible measures, underscoring the need for their revision.”
In turn, Senior Lawyer of the Evris law firm Kateryna Breduliak said that the rules of the current law on financial services and public regulation of financial services markets have long been outdated, not to mention that some financial service markets use specialized laws, in particular, laws on insurance, credit unions, and private pension provision. Thus, the introduction of changes to the current legislation of the non-banking financial market would streamline legislation in this area.
“The bill will not affect the reduction in the number of fair market players. The legislative initiative is aimed at making changes to the framework law, since the requirements are duplicated in several laws. If it is presumed that all operating non-banking institutions comply with the law, the adoption of the law will not affect the number of players on the non-banking market in the future. If it is a question of those financial institutions that avoid taxation, then, with changes, the activity of fictitious financial institutions will be stopped,” she said.
Breduliak said that, in accordance with the bill, in addition to measures of influence and sanctions, if the circumstances and risks affecting the solvency of a market player are negative, the national commission will be able to apply corrective measures. These measures are recommendatory in nature and are not binding on the market player, but if applied, the financial service market player automatically falls under the suspicion of the commission.
Commenting on the effectiveness of the supervision mechanisms of players in the non-banking financial market prescribed in the bill, Breduliak said that the regulator plans to implement public control measures in the form of planned inspections, unscheduled inspections and unscheduled field inspections, and the bill determines the procedure, deadlines and rules for conducting these inspections.
“Preventive and corrective measures will certainly contribute to the observance of the requirements of legislation by players of the non-bank financial market,” the lawyer said.
At the same time, according to the expert, at present not all players of the non-banking market are ready to confirm the transparency of the financial services provided.
“In any case, equal conditions for both banks and non-bank financial institutions will only contribute to competition in their provision. The regulator should rule out the sudden disappearance of financial market players, since in the end the consequences and losses are borne by consumers,” she said.