Reform Index 228: Recognition of Education Obtained in the Occupied Territories, and a Three-Tier Capital Structure for Banks

A new (three-tier) capital structure will be implemented for banks, +1.5 points

In 2024, Ukrainian banks are expected to implement a three-tier capital structure. This decision is part of harmonizing banking sector regulation with European norms and Basel 3 standards (adopted in 2010-2011).

The new Regulation on the Procedure for Determining the Regulatory Capital by Ukrainian banks envisages that the regulatory capital will consist of three parts (previously, it consisted only of the core and additional capital):

• Core Tier I capital (stocks/shares in the bank’s statutory capital, emission income, profit, bank’s reserve fund);
• Additional Tier I capital (contingent write-off/convertible instruments based on their balance value),
• Core Tier II capital (preferred shares in the registered statutory capital of the bank, subordinated debt).

The specific components of the regulatory capital for banks are to be approved by the National Bank of Ukraine.

The law on recognition of education obtained in the temporarily occupied territories of Ukraine, +1 point

At the end of 2023, Volodymyr Zelensky signed a law simplifying the process for children who received education in temporarily occupied territories to obtain Ukrainian education documents.

In order to confirm their schooling, they will need to undergo certification, which will include examinations in the Ukrainian language, literature, Ukrainian history, and the fundamentals of state and law. The Cabinet of Ministers will determine the vocational and professional education certification requirements. 

Education at the bachelor’s level will be partially recognized (up to a maximum of 75% of the educational program), while higher academic/scientific degrees will not be recognized at all (except for master’s degrees in medical, pharmaceutical, and veterinary fields). Additionally, the Cabinet of Ministers is tasked with compiling a list of professions for which recognition of prior learning outcomes in the temporarily occupied territories will be impossible. It is likely that this is done to avoid granting Ukrainian educational and scientific degrees for pseudoscientific activities. 

The law on oil and oil products reserves, +1 point

The need to create a strategic reserve of oil and oil products in Ukraine has been discussed for nearly 20 years. Mention of it was made in the Energy Strategy of Ukraine until 2030, adopted back in 2006. Finally, lawmakers have moved from words to action.

Signed at the end of December, Law 3484-IX introduces into our legislation the principles of Directive 2009/119/EC regulating the creation of a reserve with minimum stocks of oil and oil products. Oil and oil products from the reserves cannot be used for commercial purposes; they are intended solely to address crisis situations in the oil products market. The decision on the use of reserves will be made by the Cabinet of Ministers. 

According to the law, the reserve of oil and oil products must be at least as large as the greater of these quantities:

• The volume of oil and oil product imports for 90 days.
• The volume of domestic consumption for 61 days.

At least one-third of the reserves must consist of oil products.

The creation and maintenance of the reserve will be funded by market participants using their own funds. This requirement will be implemented gradually over eight years. As for establishing minimum oil reserves, the obligation falls on them six months after the end of martial law.