Basis for Legislating to Institutionalize Personal Deposit Protection System

Abstract

The article conducts a legal analysis of approaches to understanding the nature of the powers of the Deposit Guarantee Fund for Individuals, impacting the institutional reform of the respective deposit guarantee system. The author delineates the powers of the Fund. According to the proposed approach, the powers of the Fund regarding the functioning of the deposit guarantee system are divided into two subgroups: managerial and entrepreneurial. Managerial functions aim to institutionalize the deposit guarantee system itself. They are oriented towards the interaction of the Fund with banks participating in this system rather than towards depositors. Entrepreneurial powers essentially represent a specialized form of commercial activity, involving measures to preserve and increase the funds collected from participants in the deposit guarantee system. Powers related to ensuring the functioning of the deposit guarantee system for individuals, both managerial and entrepreneurial, are inherent to the Fund and require further development in accordance with international standards and Ukraine’s European integration commitments. It is essential to ensure a balance between state intervention and self-regulation through market instruments in the relevant sphere. Additionally, regulatory, administrative, and supervisory powers are separately highlighted, primarily concerning the removal of insolvent banks from the market and bank liquidation procedures. During the institutional reform of the Fund, it is necessary to review these powers, taking into account their nature and the constitutional regulation of relevant legal relationships. In particular, it should be noted that the concepts of “deposit guarantee” and “deposit insurance” are legally distinct in nature. This is a crucial aspect that further elucidates the functional orientation of the Fund’s powers, the specific procedure of its formation, and, most importantly, its role and significance in the banking system of Ukraine. It is critically important for the entire deposit guarantee system for individuals, as well as the removal of banks from the market to be legally transparent and predictable. To achieve this goal, all main mechanisms, procedures, and forms of activity should be appropriately regulated at the legislative level. In this regard, the experience gained from the relevant legislative regulation of the activities of state “regulators” and the functioning of self-regulatory organizations in related fields can serve as a basis for further institutional reform of the deposit guarantee system in Ukraine.