Reliability control: for the period of martial law, the NSSMC introduced a new norm of asset liquidity

The NSSMC has taken another step to reduce the burden on professional participants of capital markets and organized commodity markets.

From February 16, 2023 and during the period of martial law, the regulator stopped the calculation and submission of prudential standards, as well as stopped law enforcement in this direction. Instead, the instrument introduced during martial law remains in force – the asset liquidity standard.

The NSSMC expects that the innovation will contribute to the maintenance of financial stability in capital markets and organized commodity markets, objective and regular assessment of assets and financial condition of professional participants and protection of investors’ rights.

What is suspended for the period of martial law

In order to simplify the activities of professional participants during the period of martial law, the NSSMC has stopped:

• the effect of the Resolution of the NSSMC dated 01.10.2015 No. 1597 on the Approval of the Regulation on Prudential Standards of Professional Activity on the Stock Market and Requirements for the Risk Management System, registered in the Ministry of Justice of Ukraine on 28.10.2015 under No. 1311/27756 (with amendments) (hereinafter – the Resolution of the NSSMC No. 1597), as well as the preparation and submission to the NSSMC by professional participants of reporting data on the results of calculating the prudential standards established by this Resolution and the data on the basis of which their calculation was carried out;
• initiation of cases for non-compliance with the requirements regarding prudential standards, as well as for failure to submit, failure to submit within the established time limits and incomplete submission of reporting data and information on the results of the calculation of such prudential standards and data on the basis of which their calculation was carried out, which took place until 16.02.2023;
• proceedings in cases of violation of legal requirements on the capital markets and organized commodity markets, which were violated during martial law before the resumption of the requirement to submit prudential regulations.

The last day of calculation of prudential standards is February 15, 2023.

Compilation of reporting data based on the results of calculation of prudential standards and their submission to the NSSMC will stop on February 16, 2023.

Resumption of the requirement to submit reporting data, proceedings in cases of violations of legal requirements will take place 90 days after the end of martial law, and the term of execution of orders to eliminate violations of legislation on capital markets and organized commodity markets is extended for a period of up to 90 days after the termination of martial law .

The NSSMC draws attention to the fact that the specified information refers exclusively to the prudential standards established by the Resolution of the NSSMC No. 1597.

All of the above is established by the Resolution of the NSSMC No. 153 dated February 15, 2023, which can be found on the official website of the regulator.

What has been implemented and is in effect

In order to control the financial stability and reliability of professional participants, a new standard of asset liquidity was introduced during the period of martial law. It is calculated according to the established formula, which includes cash, domestic and foreign government loan bonds, financial instruments and obligations of a professional participant in relation to the minimum amount of initial capital established by law for the relevant type of professional activity on capital markets and organized commodity markets.

The following regulatory values of the asset liquidity standard have been established by the NSSMC:

from January 1, 2023 – at least 0.1;
from March 1, 2023 – at least 0.3;
from October 1, 2023 – at least 0.5.

For professional participants who received a license from January 1, 2023, the normative value of the norm is at least 0.5.

Calculation and submission of the liquidity standard is carried out from January 1, 2023.

The calculation of the asset liquidity ratio is carried out as follows:

• investment firms, asset management companies and depository institutions calculate the asset liquidity ratio as of the end of each business day, as well as as of the end of the last day of each month, if such day is not a business day;

• other professional participants calculate the liquidity ratio of assets as of the end of the last day of each month.

Accordingly, all the details regarding the liquidity standard are established by the Resolution of the NSSMC No. 1221 dated 09/29/2022.