On 06 May 2014, the National Bank of Ukraine (the “NBU”) issued Regulation No. 260 “On Withdrawal and Revocation of Banking Licences and General Licences to Carry out Currency Operations of Certain Banks and Closing by Banks of Branches Located in the Territory of the Autonomous Republic of the Crimea and the City of Sevastopol” (“Regulation No. 260”), which became effective on the date stated.

Regulation No. 260 was adopted in line with the Law of Ukraine “On Ensuring Protection of the Rights and Freedoms of Citizens and Legal Regime on the Temporarily Occupied Territory of Ukraine” No. 1207-VII dated 15 April 2014, which we analysed in our previous law-now article, and other pieces of legislation passed following Russian occupation of the Crimea. Regulation No. 260 is a result of the NBU being unable to perform its duties relating to regulation and supervision, as well as currency control and state financial monitoring, over banking activities in the Crimea.

Regulation No. 260 affects Ukrainian banks, foreign banks and financial institutions that wish to operate in the Crimea, as well as any and all clients that need banking and related services in the Crimea. Starting from 06 May 2014 (with one month grace period for closing branches), the NBU considers as illegal:

  • any banking activities of Ukrainian banks in the Crimea;
  • any correspondent relations of Ukrainian banks with any other banks and financial institutions located or operating in the Crimea; and
  • banks providing financial services in the Crimea through their agents.

Under Regulation No. 260:

  1. Two Crimean banks, namely Public Joint-Stock Company “Chornomorskiy Bank for Development and Reconstruction” and  Public Joint-Stock Company of Bank “Morskiy”, are no longer allowed to conduct banking activities and their banking licences and general licences to carry out currency operations are withdrawn and revoked.
  2. It is prohibited for Ukrainian banks to have branches in the Crimea. To this end, Ukrainian banks are obliged to immediately terminate any activities of their existing Crimean branches and to close them by 06 June 2014.
  3. It is prohibited for Ukrainian banks to have correspondent relationships with banks, both Ukrainian and foreign, or other credit and financial institutions located and/or operating in the Crimea. However, it remains unclear whether this prohibition applies exclusively to banking correspondent relations or to any cooperation of Ukrainian banks with such financial entities in the Crimea. Given the legislation already adopted and recent tendencies, it appears that this prohibition may be applied to any cooperative activities of Ukrainian banks with financial entities located or operating in the Crimea.
  4. Banks are prohibited from providing financial services to their clients in the Crimea through their commercial agents, with whom banks have entered into agency agreements.

According to the NBU, the prohibitions imposed by Regulation No. 260 will remain in effect during the occupancy of the Crimea by the Russian Federation.

Legislation: Regulation of the National Bank of Ukraine “On Withdrawal and Revocation of Banking Licences and General Licences to Carry out Currency Operations of Certain Banks and Closing by Banks of Branches Located in the Territory of the Autonomous Republic of the Crimea and the City of Sevastopol” No. 260 dated 06 May 2014.