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White Paper on Future Regulation of Factoring Published in Ukraine

On 5 May 2020, the National Bank of Ukraine (NBU) published a white paper on the future regulation of the factoring market in Ukraine (Factoring White Paper). The main purpose of the Factoring White Paper is to present the NBU's vision of how the Ukrainian factoring market should operate and be regulated.

The Ukrainian factoring industry has been showing dynamic growth in recent years, and the NBU is now seeking to align Ukrainian regulations with international standards to promote further growth of the factoring business. Starting from 1 July 2020, the NBU will be responsible for overseeing the non-banking financial sector, including factoring companies.

The new model for regulation of the factoring industry in Ukraine as presented in the Factoring White Paper includes the following key points:

  • Regulation and licensing: The factoring market will be regulated and supervised by the NBU using the risk-based approach. Licensing and oversight requirements will vary depending on the business model chosen by a particular factoring company.
  • Access to financing: The list of eligible sources of funding will be clarified to include, among others, funds received from shareholders or affiliated entities, or other financial institutions, or through issuing bonds.
  • Capital requirements: A factoring company will be required to maintain its capital at a minimum of UAH 3 million (c. USD 112,000); and should the company wish to render additional financial services (in addition to factoring) such minimum capital level will increase to UAH 5 million (c. USD 186,500).

Importantly, the NBU proposes to amend the Ukrainian legislation to establish a precise distinction between assignment of claims and factoring. Until now, a discounted assignment of loan claims has often been treated as factoring.

Having presented the Factoring White Paper, the NBU will now be discussing with key stakeholders and market participants the model for regulation of the factoring market in Ukraine and the relevant amendments to the Ukrainian legislation. The regulator aims the new model to become effective in early 2021.

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