The NBU has required banks to verify their counterparties

The National Bank of Ukraine has introduced a new requirement for banks, under which they must verify contractors and other counterparties that provide critical services. These changes are intended to strengthen oversight of the activities of financial institutions’ partners and enhance the resilience of the banking system.

What is changing? The resolution introduces a new concept: third-party service provider (TSP). This is a legal entity or individual that collaborates with providers of financial payment services and whose work determines whether these financial services can be provided.

For example, such a TSP could be an external contractor providing cybersecurity, an electricity supplier, an internet service provider, or an IT company that develops and maintains a bank’s mobile app.

Companies that provide the following services are not considered TRSP providers (and, accordingly, are not subject to the NBU resolution):

• audit services;

• access to global network infrastructure;

• clearing and settlement services between clearing institutions;

• services of international interbank systems for data transmission and payment processing;

• services that do not affect the operational activities of the financial services provider (e.g., cleaning, landscaping, facility maintenance, rental of company vehicles, office supplies, medical services, legal services, etc.).

With regard to other companies, banks and other financial institutions will be required to implement a risk management system related to such TRSP providers and conduct regular assessments of these counterparties.

The assessment of TRSP suppliers will involve verifying whether these companies (or their managers and beneficial owners) have ties to an aggressor country or are included on sanctions lists. In such a case, the bank or other financial service provider must terminate its cooperation with that company “as soon as possible.”

In addition, the business reputation of the TRSP provider, its executives, and owners will be verified.

This is stated in a resolution that, according to EP, the National Bank adopted on June 30. The regulator had published a draft of the relevant document as early as May 26.

Over the course of a week, the NBU sold nearly $1.4 billion on the interbank market.

Earlier, PrivatBank was included in the list of entities subject to privatization in 2018–2020.

It was later announced that the nationalized PrivatBank might not be ready for privatization until at least 2022.