FY 2017 THIRD QUARTER REPORT April – June 2017

USAID FINANCIAL SECTOR TRANSFORMATION PROJECT

Contract Number: EEM-E-00-00002-00/AID-121-BC-17-00001

COR/USAID Ukraine: Natalia Berezhna

Chief of Party: Robert Bond

Submitted by:

DAI Global LLC

July 25, 2017

TABLE OF CONTENTS

I. EXECUTIVE SUMMARY ...... 3

II. PROJECT IMPLEMENTATION RISKS ...... 5

III. MONITORING AND EVALUATION REPORT SUMMARY ...... 6

IV. PROGRESS BY WORK PLAN ACTIVITY AREAS ...... 8

A. PUBLIC CONFIDENCE IN THE FINANCIAL SECTOR ...... 8

B. CAPITAL AND COMMODITY MARKETS ...... 13

C. NBFI DEVELOPMENT (ACCESS TO FINANCE) ...... 15

D. DIGITAL FINANCE ...... 19

E. PENSION REFORM ...... 21

V. ADMINISTRATION / PROGRAM ISSUES AND LOOKING AHEAD ...... 24

A. ADMINISTRATIVE ISSUES ...... 24

B. MAJOR ACTIVITIES PLANNED FOR FY17-Q3 ...... 24

VII. ANNEXES...... 25

I. EXECUTIVE SUMMARY

During Quarter 3, the USAID Financial Sector Transformation (FST) Project transitioned from its mobilization and assessment phase to implementation. The Project completed and submitted all required financial sector assessments (Financial Intermediation, Digital Finance, Legal and Regulatory Harmonization, Pension Reform Options), prepared an Intervention Analysis, finalized its Activity Monitoring and Evaluation Plan (AMEP), and completed a Gender Analysis and Risk Monitoring plan. FST also carried out required ICT assessments of the Pension Fund of Ukraine (PFU) and the National Securities and Stock Market Commission (NSSMC). Accordingly, the Project focus was on providing direct technical assistance, establishing productive working relationships with counterparts, and implementing an active public outreach program on consumer financial protection, financial literacy and awareness, pension reform, and digital finance. A list of key documents produced by the Project is provided in Annex 1. Annex 2 provides an up-dated copy of the project’s Work Plan, April 2017 to September 30, 2017, with a status report on deliverables.

The Project undertook several major initiatives in pursuit of its objective to transform the financial sector, focusing on the development of non-bank financial institutions (NBFIs). Highlights by key focus area include:

Public Confidence in the Financial Sector The Project strategy is to build public confidence in the financial sector by focusing on changing attitudes and behavior of individual consumers, through legal/regulatory reform, financial empowerment training, and public education and outreach activities. Successful FST initiatives included: • Support for the new Consumer Lending Law, including comments on the regulations adopted, holding a major conference on practical implementation issues, and the launch of a survey on consumer lending practices by NBFIs (advertising, information disclosure) with the results to be presented September 12 at a 1-day conference on consumer protection with the National Bank of Ukraine (NBU). • An active program of financial education for vulnerable groups in 11 oblasts of Ukraine, with subcontractor the Ukrainian Women’s Fund. During the quarter, 1,347 individuals participated in 2-day trainings. • Promotion of the role of the NBU as the leader of financial consumer protection in Ukraine, including a major report on international practice in supervising and regulating consumer finance. • Promotion of the concept of a financial ombudsman for Ukraine with regulators, NBFIs, members of parliament, and international donors, including a draft law to be submitted to the Rada in September.

Commodity and Capital Markets The Project continued its support for legal and regulatory reform for capital markets (comments on laws, participation in workshops) and improved dialogue between the Securities Commission and market participants (support for the Ukrainian Association of Investment Businesses annual conference). Two major activities were accomplished: • FST subcontractor EY completed the required analysis of the Commission’s IT systems, and recommended several improvements to enable it to perform an enhanced role in financial information disclosure. Five ITC initiatives (HR, Management Processes, Outsourcing, 2 Security Enhancements) will be implemented over the next 6 months. • A Three-day Corporate Governance Conference was held with the participation of the United States Securities Exchange Commission and the US Commodity Futures Trading Corporation. 3

NBFI Development (Access to Finance) FST’s activities mainly focused on assisting the NBU to develop strategy and capacity to regulate NBFIs, to assist the development of leasing to provide access to finance for SMEs, and to inform consumers and SMEs about NBFI services. Key activities during the quarter were: • For the NBU, conducted gap analysis of the compliance of Ukrainian legislation and regulations with EU directives for NBFIs; drafted a Roadmap for NBU supervision of credit unions; and prepared a report on international practices of regulation and supervision of credit unions through self-regulatory organizations; • With Ukrainian Union of Lessors, developed a strategic plan for industry development and assisted in preparing a draft law on leasing activity. • Conducted seminars in Kiev, Lviv and Odessa on consumer views and attitudes toward credit unions, leasing companies, pawn shops, and short-term lenders, which generated high media attention.

Digital Finance FST’S digital finance activities focused on efforts to improve the ecosystem for a cashless economy. The project commented on laws and regulations, and began drafting a direct debit law to facilitate ecommerce. The Project also organized and/or participated in several fora to communicate more broadly the advantages of digital finance and the opportunities it offers for financial inclusion of vulnerable groups, the unbanked, rural population and pensioners. The three most significant activities were: • Advised the NBU on blockchain technology and fiat currency, leading to the organizing of a study tour to the United States in September on financial inclusion, digital financial solutions and ecurrency technologies. Representatives from the NBU, Ministry of Finance, and UkrPoshta will participate. • Initiated plans for two pilot project activities, one with the Ministry of Internal Affairs on digitizing payments for motor vehicle and visa registration, and one on mobile wallets linked to agricultural value chains, in collaboration with the USAID/ARDS project.

Pension Reform Pension reform was the most active focus area of FST activities in the third quarter. New pension legislation is a structural condition of Ukraine’s economic adjustment program with the International Monetary Fund (IMF), and was scheduled to be achieved by April 2017. The Project worked collaboratively with the World Bank and the IMF (and with elements of the GOU) to produce a pension modernization bill that would improve the benefits to pensioners while being fiscally sustainable. Economic and demographic analyses and projections were performed by FST, an expert working group met regularly to develop a pension reform concept, a high-level “retreat” was held to discuss alternative pension system scenarios, and materials were distributed to a parliamentary committee. Following the introduction of the pension bill on June 22, FST (at the request of the Ministry of Social Policy, MSP) began an active program of publications, materials, and outreach activities in support of pension reform. These will be continued and expanded in the fall. FST also completed its ICT assessment of the Pension Fund of Ukraine (PFU) and began the procurement process for hardware and software purchases that will be about

II. PROJECT IMPLEMENTATION RISKS

Ukraine has been rated by USAID as a “non-permissive environment” or NPE country because of the threat of war with Russia, the conflict in the separatist held territories, and endemic corruption that constrains efforts to institutionalize a market economy. Per its Risk Assessment Report (April, 2017), the FST Project monitors risk on three levels: International (global); National (domestic); and Project-specific. During the Quarter the following developments were noted:

International/Global Risk: Potentially Severe But Low Probability The near and medium term outlook for Ukraine is for relatively low-levels of conflict to continue between the GOU and the Russian-backed separatist forces. Between April 1 and June, 30, 2017 there were repeated violations of the Minsk Agreement aimed at suspending the fighting. A political solution based on decentralization and greater autonomy for the Eastern regions of Ukraine remains elusive. Sanctions imposed by the West on Russia remain in place, and there are few signs that they will be lifted by the US or Europe. The election of a moderate French President by a wide margin was positive for Ukraine, as was the failure of UK Prime Minister Teresa May to gain parliamentary seats in a snap election. Europe now seems more united than three months ago, and “Brexit” is likely to be “softer” and less disruptive economically than previously feared. Support for Ukraine in Europe could be further solidified by the re-election of Germany’s Angela Merkel in August.

National/Domestic Risk: Possible But Unlikely The major risks to FST implementation from national/domestic sources continue to be challenges to the GOU commitment to economic reform, anti-corruption initiatives, and financial sector cleansing and development. The main positive developments in the quarter were the release by the IMF of a $1 billion loan tranche on April 3, 2017, and the IMF, World Bank and G7 endorsement of the GOU’s pension reform legislation. Pension reform legislation was passed on July 13 on the First Reading by the Rada with 282 votes, but still faces political hurdles to become law). Policy and legislative progress on major structural adjustment issues, such as privatization and especially land reform, remains stalled. The NBU forecasts GDP growth for 2017 at 1.5%; the hrynia is stable at about 26:$1.

Project Specific Risk: Possible But Unlikely Both the logical structure of the Project, and the sector assessments conducted by FST, emphasize the need for legal/regulatory reform of the NBFI sector to achieve Project goals. In major part, the sustainability of some Project initiatives is linked to the passage of certain legislative acts. The Project monitors closely about eight (8) laws and tracks a total of about 30 financial sector laws. The

Overall, it was a very slow quarter for reform legislation. The Consumer Lending Law, passed in December 2016, was implemented through NBU regulation in June, and a minor corporate governance law was enacted and signed by the President in April. FST’s monitoring table for key legislative acts is provided in Annex 3.

III. MONITORING AND EVALUATION REPORT SUMMARY The final version of the Project’s Activity Monitoring, Evaluation and Learning Plan (ME&L) and a Baseline Data Report was submitted to USAID on April 26, 2017.

On May 12, 2017, we submitted the final version of the Gender Analysis and Vulnerable Groups Integration Strategy.

On June 2, 2017, we submitted the FST Geospatial Data Report for input, output and outcome indicators under each project component.

MONITORING DATA:

Financial Empowerment Trainings and Consultations (Ukrainian Women’s Fund) The FST Communications team with the support of the Ukrainian Women’s Fund (UWF) continued its active program of financial empowerment trainings, events, and consultations for disadvantaged and marginalized groups. Between April and June 2017, the project conducted 66 trainings on financial empowerment in 11 oblasts and 30 cities for 1,347 persons. The total number of person hours of training in Q3 was 21,552 hours. This result increased the overall number of person hours of training from February to June 2017 to 25,344. Thus, by June 2017 FST/UWF achieved 64.8% of the FY17 target for this indicator.

Of the total number of persons trained in Q3, 1,118 (83%) were women and 229 (17%) were men. In addition, the breakdown for disadvantaged participants was: IDPs - 436 (32%); Pensioners - 802 (59.5%); handicapped persons, 61 (4.5%); and Anti-Terrorist Operations (ATO) Veterans - 48 (3.6%).

April May June Total Number of persons trained 459 442 446 1,347 Number of person hours of financial empowerment 7,344 7,072 7,136 21,552 training

Trainees were encouraged to apply for the post-training consultations offered by the experts of the Ukrainian Women’s Fund. Almost one third of trainees – 391 persons – benefitted from such consultations over the period from April to June 2017. The total number of consulting hours was 195.5. Trainees were mostly interested in: • Banking services (credit cards, deposits, loans, activity of debt collectors) – 118 questions; • Personal income and family budget (budget planning; financial goals; reserve fund) – 93 questions; • The Ukrainian pension system – 82 questions; • Financial fraud – 25 questions; financial on-line services – 26 questions. • Other questions discussed with UWF related to civic activism; consumer rights protection; social benefits; activities of credit unions; and business startup opportunities.

Consultations provided to financial empowerment training participants 48; 12% questions on banking services 118; 30% 25; 6% questions on personal income and family budget questions on the Ukrainian pension 25; 7% system questions on financial fraud

questions on financial on-line services other questions 82; 21% 93; 24%

FST Media placements

Media covered the FST activities 312 times over the third quarter. The majority of project- related media placements for the third quarter (195 or 62.5%) appeared in the national media and the rest (117 or 37.5%) were in regional media. The topics and FST activities that received the most media attention were: trainings on financial empowerment, developments in the area of consumer finance, and discussions on creation of a financial ombudsman position (212 or 68% of media placements). FST project activities in the non- banking financial institutions (NBFI) sector and NBFI regulations received 109 media mentions, or 35% of total placements. The remaining 33 media placements covered project activities in the areas of securities and commodity markets, transformation of regulatory environment, digital finance, and pension reform.

April May June Total Number of media placements produced with USG 49 49 214 312 assistance

The overall number of media placements from December 2016 to June 2017 totaled 354, thereby exceeding the FY 2017 target of 250. Q1 (Oct– Q2 (Jan– Q3 (Apr– Total Dec 2016) Mar 2017 Jun 2017) Number of media placements produced with USG 5 37 312 354 assistance

Events The project directly conducted/or took the lead role in 10 events in April – June 2017. Of these five were expert meetings, four were outreach events, and one a training for partners. Five events were conducted in Kyiv, four in L’viv and one in Stryi, Lviv oblast.

IV. PROGRESS BY WORK PLAN ACTIVITY AREAS

A. PUBLIC CONFIDENCE IN THE FINANCIAL SECTOR

Consumer Finance In May, FST contracted GfK to conduct a Consumer Lending Survey to analyze consumer advertising and lending practices before June 10 (the date on which the Consumer Lending Law came into effect). A "mystery shopping" activity was also included to examine actual lending practices by banks and other financial firms. The results of the survey will be analyzed, published, and presented at a FST consumer protection conference in September, 2017. The Project also intends to repeat the survey in six months, and then again in 12 months, to measure the impact of the Law on Consumer Lending on the practices of financial sector institutions and consumers, and to evaluate the level of improvement in the consumer lending market in Ukraine.

On June 15, FST jointly with the National Association of Banks of Ukraine (NABU) conducted the roundtable on the Law on Consumer Lending, publicizing its entry into force and discussing the new regulations implementing the law. The target audience was banks, NBFIs, regulators, and journalists. The roundtable attracted approximately 120 participants, including top-level management of the NBU, NABU, the Financial Services Regulator (FSR), banks and other non-bank Kateryna Rozhkova at Roundtable on the Law on Consumer financial institutions, representatives of Lending (June 15, 2017, Kyiv) market associations, experts in the field, and Members of Parliament (MPs), who participated in the development of the Law, and media. At the event, NBU Deputy Governor, Kateryna Rozhkova, announced the NBU's support of the Consumer Protection Law and indicated that the NBU was organizing itself to take on this important function.

To support the development of a robust and effective financial consumer protection regime, the Project is developing a Financial Consumer’s Guide/ Borrower’s Guide. The purpose of the publication is to help consumers understand all stages of the consumer lending process based on the new Law on Consumer Lending. The brochure will address financial product advertising, pre-contractual stage discussions, contractual terms, the actual cost of a loan and effective interest rate, estimated cost of services rendered by third parties, passport of the credit, concluding a contract, payment terms, fines, etc. The brochure will include an overview of the key consumer loan products, and key criteria and considerations when taking out a loan.

Consumer Protection The major legislative work in the area of Financial Consumer Protection focused on the facilitation of passage of Draft Law #2456-д “On Amending Certain Legal Acts regarding Financial Consumer Protection” that would empower financial regulators to perform the function of consumer protection. The law provides for specific penalties for infringing on the rights of consumers as enumerated in the Consumer Lending law and gives regulators enforcement power. In April, the Project sent a joint letter with NABU to the Verkhovna Rada Chairman for support of the Draft Law 2456-Д, requesting to include and prioritize it into the agenda of plenary meetings. In June, another letter requesting consideration was sent to the Chairman of the Verkhovna Rada of Ukraine and to heads of parliamentary groups. 8

Unfortunately, on June 20, the Verkhovna Rada failed to adopt this legislation, and sent it back for the second reading. FST expects the Draft Law #2456-д to pass in early fall 2017.

At the request of the NBU, FST prepared a report entitled International Experience on Financial Consumer Protection. This report presents an overview of how financial sector oversight bodies in selected countries implement the financial consumer protection function. Specifically, this overview reviews institutional arrangements in place to perform consumer protection in Armenia, selected because its central bank has recently launched a consumer protection division, selected European Union (EU) countries (Czech Republic, Hungary, Ireland, Lithuania, Luxembourg, Netherlands, Poland, Portugal, United Kingdom), and some important financial markets such as the U.S., Canada and Australia. In June, the report was sent to the NBU staff working on financial consumer protection issues. FST will also provide the report to other financial sector regulators once it is translated into Ukrainian. FST will provide further support to financial sector regulators in adopting the consumer protection functions and implementing Draft Law # 2456-д when it passes.

Also during the quarter, FST initiated plans to hold a major consumer financial protection conference in September with the participation of international experts from different EU countries. In addition, FST plans to arrange meetings for them with representatives of the Parliament, the NBU, and other groups or officials they might be interested in meeting to discuss the consumer financial protection agenda.

Financial Ombudsman FST continued its efforts to promote a meaningful enforcement regime for consumers of financial services through a series of meetings on the concept of the financial ombudsman. Discussions were held with financial market representatives from NABU and the banking industry, insurance companies and their associations, and NBFIs and their associations. FST analyzed their comments and proposals, incorporated the most relevant ones into the Project’s Draft Law on Financial Ombudsman.

On June 29, 2017, FST hosted a meeting for about 25 financial sector lawyers (government, private law firms, associations) to discuss the concept and the structure of the Draft Law on financial ombudsman. The purpose was primarily to identify potentially disputable and contentious issues in the FST draft law that would need to be discussed and resolved. As a result of this meeting, FST created a small, specialized working group, including representatives of the NBU, NABU and associations of financial institutions and insurance companies, to reviewing and complete the FST Draft Law on financial ombudsman.

Article by Tetyana Burak on the financial ombudsman as a step forward in restoring financial confidence; "Economichna

Pravda," June 27, 2017 FST plans to present the Draft Law on http://www.epravda.com.ua/columns/2017/06/27/626490 financial ombudsman to the Verkhovna Rada Committee on Financial Policy and Banking Activity in early September and to publicize it to all financial sector stakeholders during the September 12 international conference, “2017 Financial Consumer Protection: Road to Building Trust.”

FST Staff Member, Tetyana Burak, also published an article on the financial ombudsman concept in "Economichna Pravda," which is a part of "Ukrainian Pravda," a major portal for political/economic news. Its audience includes MPs and staff, the financial markets (bankers, brokers, NBFI), GOU, and others.

Ukrainian Women’s Fund Program on Financial Empowerment The map below provides additional information on the location of UWF Financial Empowerment training activities.

Map with results on Securing Future Through Financial Empowerment Program

March-June 2017

Telephone interviews and analysis of the participant questionnaires indicate that the program is having a significant impact on individual’s confidence in dealing with finance. Over 90% of training participants report that they feel more secure after attending FST/UWF financial empowerment trainings. About 70% of respondents started using various banking and financial services (opened bank accounts, started using payment cards for purchases and online banking, took loans, and opened savings accounts). About 60% of respondents indicate that their livelihood and/or their family livelihood has improved because of the knowledge they gained during the training. Participants show special interest in the topic of personal finance, report sharing their knowledge and recommending the training to their friends and family members.

Maryna Pasechnyk, a trainer from the Ternopil Oblast, is Training session in Cherkassy City, 25-26 May 2017 providing advice to a training participant on how to avoid financial scams. Ternopil, May 2017

The UWF/FST Program has also received considerable media attention. In April, presentations to the media were conducted in each of the 11 oblasts to publicize the training program. Representatives of the local authorities, NGOs, civil society groups, and the media participated in these launch events. As a result, over 250,000 people learned about the Program through the media.

Financial Empowerment In 2014, Olena Makaya-Melnikova, a mother of five children, moved with her family from Donetsk to Zaporizhzhya, escaping the conflict in eastern Ukraine. It was a very difficult time for all of them. The family had to find new jobs, schools, and a place to live. They survived only because of Olena’s tailoring skills, and the sewing machine she managed to bring with her when relocating. The family allowance/stipend provided by the state helped but was not enough to survive. So Olena started to look for ways to put her sewing talent to use to earn income, and discovered at the state employment office the UWF advertisement for a course on how to manage money. She was happy to Olena Makaya-Melnikova with her family. learn about the FST/UWF Securing the Future Through Financial Empowerment Program, and signed up immediately. She participated in the training in Zaporizhzhya, and not only gained understanding of budgets and finance but became better integrated to the community. This integration, in turn brought her clients for her sewing services. “Thanks to knowledge gained during the training, we now keep a family budget and keep track of our revenues and expenses. The course also showed me new opportunities to find tailoring and sewing work and clients. We have learned the importance of savings and being careful in dealing with finances.”

Cooperation Protocol with the Deposit Guarantee Fund In May, FST signed a Protocol of Cooperation with the Deposit Guarantee Fund (DGF) of Ukraine for cooperation on financial literacy and consumer protection. The DGF is the only GoU institution that has an explicit mandate to support financial literacy, and the Project will design and implement specific programs with the DGF. Moreover, the Project is incorporating the DGF into its larger programmatic activities on financial awareness and financial consumer protection, with the NBU, NABU, and other partners. In June, FST and the DGF agreed on an Action Plan through September 30, 2017 that focuses on three key areas: assistance in legal and regulatory drafting related to protection of financial consumer rights and deposit guarantees; support for financial literacy initiatives; and training to DGF staff in conflict communications, Hot Line operation, and data visualization. The next Action Plan will cover the period from October 1, 2017 through September 30, 2018.

Global Partnership for Financial Inclusion (GPFI) Forum in Berlin Arina Chernykova, Project Manager for Financial Literacy at the NBU, and FST Public Outreach and Literacy Advisor Natalia Lozytska, attended the Global Partnership for Financial Inclusion (GPFI) Forum in Berlin, Germany, May 2-3, 2017. GPFI is an inclusive platform for all G20 countries, interested non- G20 countries, and relevant stakeholders to carry forward work on financial inclusion, including implementation of the G20 Financial Inclusion Action Plan (FIAP), endorsed at the G20 Summit in Seoul. Individual sessions of the Forum focused on SME finance, strengthening digital and financial literacy, Annual Global Inclusion Awards 2017 ceremony (May 3, 2017, Berlin) young entrepreneurs, digitalization of the financial services, and financial inclusion for rural areas and forcibly displaced persons. Following the Forum, NBU and FST representatives participated at the Annual Global Inclusion Awards 2017 ceremony. Ukraine had been short listed as a finalist for the Global Money Week Award, acknowledging the efforts and accomplishments of the NBU/USAID FST team in implementing “Global Money Week 2017.” In partnership with the NBU, FST conducted a weeklong series of educational initiatives for students, businessmen, and the general public.

General Outreach FST's public outreach efforts during the quarter resulted in 312 media placements. In June, FST ranked second among all USAID Projects for media awareness about USAID's work in Ukraine, getting 220 media mentions during the month. Only two USAID projects got over 200 mentions.

The Project creates high value content and Yulia Vitka talking on new Consumer Lending Law (Hromadske Radio air, May 29, 2017 conducts public events that generate media interest in FST activities. These media and public outreach activities help FST to achieve its goal of building public confidence in the financial system. FST uses several methods of media and public outreach: it generates its own content (articles, commentaries, press releases, informational materials, videos); it invites journalists to Project public events; it organizes interviews for journalists with Project experts; Rostyslav Dyuk on DFS Survey results (News on Espresso and it conducts press conferences and briefings TV Channel, June 2, 2017) on selected topics.

The focus of media attention was on three areas: consumer finance and consumer protection, NBFIs and digital finance, and Project research on financial markets. The most popular topic of the reporting period is entry into force of the law on Consumer Lending and the new consumer rights arising from it, which have affected at least 8 million borrowers who use loans in Ukraine. There were more than 100 publications on the new Natalia Ilina about NBFI Survey results(UBR Channel, rules of consumer lending published in the June16, 2017) media this quarter.

Planned Activities for July-September 2017 • Prepare the Report on Consumer Lending Survey results – July-August 2017 • Develop the Financial Consumer’s Guide/ Borrower’s Guide – July-September 2017 • Present the Draft Law on financial ombudsman to the Verkhovna Rada Committee on Financial Policy and Banking Activity – September 2017 • Conduct “2017 Financial Consumer Protection: Road to Building Trust” international conference – September 2017 • UWF Financial Empowerment Program Training Rollout in 11 oblasts of Ukraine – July – September 2017 • Preparation for the FST/NBU Road Show on Financial Awareness to be conducted in 4 cities of Ukraine – July-September 2017 • Public presentation of Pension Survey Results – September 2017 • Conducting a series of regional roundtables on pension reform – July, September 2017 • Hold a high-level roundtable discussion on pension reform in Kyiv • Development of public service announcements (PSAs) on pensions – September 2017 • Conduct ToT training on financial empowerment, training on conflict communication for DGF staff – August- September 2017 • Prepare articles and publications on consumer finance and consumer protection, and Project’s focus areas.

B. CAPITAL AND COMMODITY MARKETS The Financial Sector Transformation Project (FST) continued its work in the capital markets area focusing on providing legal and regulatory support to the National Security and Stock Market Commission (NSSMC), assisting market initiatives and dialogue, and raising awareness of financial disclosure/corporate governance and its relevance to market development.

Legal and Regulatory Support This was a slow quarter for much needed legislative changes in Ukrainian capital markets. Neither of the two important draft laws that FST monitors closely (on derivatives and on new independent powers for the NSSMC) advanced significantly in the parliament. In April, the NSSMC decided to separate the independent market regulatory provisions from the Derivatives Law (# 3498) and introduce them via a new Law (# 6303) for inclusion on the parliamentary agenda. Draft Law # 6303 will have to begin anew in the parliamentary process (i.e., be voted on the Verkhovna Rada, pass through committee review, and be voted on twice). During the Quarter, FST prepared a comprehensive analysis of the draft Law #6303 “On Introducing Amendments to Certain Legislative Acts of Ukraine on Investors’

Protection from Abuse at Capital Markets,” comparing it to IOSCO principles and EU Directives.

Two laws on corporate governance were passed by the Verkhovna Rada. The Law “On Introducing Amendments to Certain Legislative Acts of Ukraine on Improvement of the Corporate Governance Level in Joint Stock Companies” (the so called “Squeeze-out/Sell- out Law”), was passed by the Parliament on March 23, 2017, signed by the President and became effective on June 4, 2017. Draft law No. 4470 “On Introducing Amendments to Certain Legislative Acts of Ukraine on Corporate Agreements” (a so called “Corporate Agreements Law”) was passed by the Parliament on the same day, but has not yet signed by the President. (Note: the constitutional deadline for the President either to sign or to veto it has expired).

The Project also reviewed and commented on other capital markets laws. Draft law No. 5592-d “On Introducing Amendments to Certain Legislative Acts of Ukraine (on Business Simplification and Raising of Investments by Securities’ Issuers)” proposes comprehensive changes in the initial and periodic information disclosure framework in Ukraine, as well as important changes in the corporate governance regime and certain others securities-related matters. The majority of changes are driven by the need to align Ukrainian laws with the EU Prospectus and Transparency Directives, and IOSCO Principles.

Market Outreach and Development On May 22, 2017, Yulia Vitka, FST’s Deputy Chief of Party, made a presentation on legal aspects of financial disclosure at the round table "Price of Publicity: Challenges and Opportunities for Joint-Stock Companies" held at the Ukrinform Press Center. Participants included the NSSMC’s Chairman, Members of the Parliament, representatives of issuers and market intermediaries. The main topic of discussion was draft law No. 5592-d on disclosure of information on the stock market, improvement of the issuance of securities and the expansion of opportunities for raising capital.

FST supported the participation of market regulators at the Ukrainian Association of Investment Businesses Annual Conference in Odessa, June 9-10, 2017. The agenda included discussions of capital markets regulation and development, corporate governance, and private pension reform. There was a special emphasis on the importance of a high quality stock market infrastructure for the further development of all these areas.

On June 20, 2017, USAID Desk Officer for Ukraine, Alison Case, opened a three-day conference on corporate governance issues organized by FST in collaboration with the NSSMC. Over 140 individuals participated in the event. The first day of the conference was mainly informational and included comprehensive presentations from Eric Pan of the U.S. Commodity Futures Trading Commission (CFTC), and Katherine Martin and Karen Garnett from the U.S. Securities and Exchange Commission (SEC), as well as a roundtable on information disclosure issues. USAID Desk Officer for Ukraine Alison Case opened a During the following two days, the conference three-day conference on corporate governance issues in featured panel discussions, which included Ukraine (June 20, 2017, Kyiv) the CFTC and SEC representatives, several Members of the Parliament, the NSSMC’s Chairman and key Department Heads. Panel speakers included representatives of the President’s Administration, the Ministry of Finance, 14 the Ministry of Economy, the NBU, and representatives of the market intermediaries (for example, the National Depositary of Ukraine, and PrivatBank, among others.), and other entities and institutions (the Audit Chamber of Ukraine, Ukrainian Academy of Corporate Governance, etc.). Conference participants discussed shareholder rights, the structure and functioning of corporate boards, the importance of disclosure, and auditing and accounting issues in Ukraine’s existing corporate landscape. FST’s Deputy Chief of Party spoke at the panel discussion dedicated to enhancing compliance with corporate governance and disclosure requirements, and FST’s Senior Lawyer, Tetyana Grischenko, moderated another panel discussion dedicated to specifics of corporate governance in market intermediaries (banks, professional securities market participants and other financial sector players).

On June 23, 2017, the Ukrainan Exchange (UE) received approval from the NSSMC to trade two deliverable grain contract futures (corn and wheat). The UE is treating this as a pilot project to test trading, clearing, and settlement procedures for deliverable futures. If successful, deliverable grain futures on the UE would allow small and medium sized farmers to receive better prices for their grain. FST assisted the UE in drafting the legal specifications for the futures contract.

Improving NSSMC’s ICT systems FST partner, EY/Ukraine, completed its thorough analysis of the NSSMC’s ICT system, delivering both “As Is” and “To Be” assessment reports. In follow up meetings, it was agreed that FST/EY would assist the NSSMC to improve its operability through five IT initiatives: Human Resources, Outsourcing, Management Processes, and two Security Enhancements. This technical assistance (including implementation support) will be provided over the next 6-9 months, in coordination with other international donor efforts to improve the functionality of the Commission. FST organized and chaired a donor coordination meeting with the UK/Ukraine Good Governance Fund (and its subcontractor PwC) and the EU Finstar Project to share information, jointly monitor implementation, and coordinate activities with the NSSMC to improve significantly the ICT capacities and functionalities of the NSSMC. The goal is to improve the capacity of the NSSMC sufficiently to enable it to operate and maintain an inter-ministerial financial disclosure system for Ukraine.

Planned Activities July – September 2017 • Identify possible areas of FST assistance and support for commodity and futures markets intermediaries (exchanges, brokers, etc.). • Initiate a 3-part series of roundtable discussions of key capital markets laws • Discuss with the market participants, NSSMC and CFTC a commodity conference agenda. • Support UE’s initiatives to promote new commodity instruments • Participation and possible support of annual Ukrainian Financial Forum • Legal analysis of draft legislation related to capital markets • NSSMC IT improvement initiatives with EY

C. NBFI DEVELOPMENT (ACCESS TO FINANCE)

The NBFI Component team finalized the Assessment Report on Non-Bank Financial Institutions of Ukraine. It contains an analysis of the NBFI market, its institutions, legal, regulatory and other constraints, international donor activities, and opportunities for targeted interventions. Credit sectors/lenders covered include leasing companies, credit unions, pawnshops, payday lenders, group purchasing pools, factoring companies, and SME finance generally. Besides the market overview, the report includes legal, regulatory, and

15 tax risk issues to NBFI development (analyzed with the support of EY), and the results of qualitative analysis based on 10 focus groups in different regions of Ukraine and 20 in-depth interviews with representatives of SMEs conducted by GFK Ukraine. Key findings of the assessment, including SWOT analysis of each NBFI sector, were used to plan the implementation activities for the FST Project FY 2017-18 work plan.

Support to the NBU on the “Split Law” During the reporting period, the FST Team support to the NBU on NBFI regulation: FST team worked with the NBU  Conducted gap analysis of the compliance of Ukrainian Department of Strategy and legislation and regulations with EU directives for NBFIs; Reforms on measures to regulate  Drafted Roadmap for NBU supervision of credit unions; and supervise NBFIs, once the  Prepared an analytical report on international practices Draft Law #2413a (the “Split” Law of regulation and supervision of credit unions through eliminating the Financial Service self-regulatory organizations; Regulator for NBFIs and  Organized an orientation and learning experience to Lviv reassigning its responsibilities to credit unions for NBU representatives. the NBU and the NSSMC) is passed by the Parliament. Specifically, the FST team conducted a gap analysis of the compliance of Ukrainian legislation and regulations with EU directives for NBFIs and prepared a draft report, covering the following areas: • General provisions for financial services, including terminology applicable to financial market participants, types of financial services, and cross-sector requirements for provision of financial services; • Prudential and consolidated supervision over NBFIs; • Authorization procedures and internal governance rules applied to NBFIs; • Financial reporting and disclosure, auditing, recovery, resolution and winding-up. A draft report prepared by FST’s legal staff was submitted to the NBU for review. FST has asked an international NBFI Supervision Legal Advisor (Gary Gegenheimer) to review and finalize the gap analysis, meet with NBU officials, and provide recommendations for improvement of the current legal framework in accordance with applicable EU Directives/Regulations and international standards. The FST Team provided the NBU a regulatory model for credit unions. The following actions were undertaken: • The FST team developed a draft Roadmap for the NBU to supervise credit unions if/when it becomes the NBFI regulator. The team paid close attention to the following issues: the not-for-profit tax status of credit unions; licensing; deposit mobilization and the provision of loans; payment systems; membership; self-regulation; the status of united credit unions; and the recovery and financial stabilization of Ukrainian credit unions. • The FST team prepared an analytical report on international practices of regulation and supervision of credit unions through self-regulatory organizations (SRO), based on the experiences of Germany, Poland, Romania, Lithuania and Hungary. The question of developing a functioning SRO (and united credit unions) is a critical issue for the NBU, and is also relevant to the Cabinet of Ministers official statement (reference), for the improvement of the draft of the Law “On Credit Unions”. • On May 5, 2017 FST organized a joint workshop with the USAID CAP project for NBU representatives to discuss the EU perspective of regulation of credit unions. The workshop was followed by a seminar on the “System of Moldovan Credit Unions” organized by the USAID CAP on June 27, 2017 where Alina Chebotaryov, the Head of Department of Moldovan National Financial Markets Commission, presented the Moldovan experience with implementation of EU Directives to the NBU representatives and FST experts.

• A delegation of five NBU staff, accompanied by the FST NBFI team visited two established credit unions in the Lviv region. The purpose of the trip was to expose the NBU regulators, who are responsible for developing the roadmap for regulation of the NBFI sector, to the management and operations of credit unions and to exchange ideas about the future Visit of NBU representatives to CU “Anisia” withtin the Road- regulatory regime for credit unions. show «Practical experience of credit unions’ work», June 15, This visit was the first experience for 2017 most of the NBU staff with credit unions. In addition, the FST legal team conducted several meetings with the NBU and the FSR as well as participated in the Parliament Banking and Finance Committee’s working group sessions devoted to amendments to the law on financial services regarding NBFI resolution and winding-up procedures.

Leasing Development of the leasing market and improvement of leasing tools to increase SME access to finance are priority areas of the FST NBFI Component for FY17-18. The FST Team has developed a strong partnership with the Ukrainian Union of Lessors (UUL), conducted a needs assessment of its members, and drafted an Action Plan of the Ukrainian Union of Lessors (UUL) for 2017-2020 that was approved by the UUL Board on April 19, 2017.

Strategic Objectives of the UUL Action Plan  Facilitate the development of legal and regulatory framework of the leasing market;  Seek new sources of funding, in particular. by studying the possibilities of cooperation with foreign and local investors;  Promote the introduction of leasing assets securitization mechanisms, etc.;  Promote the creation of new products and market development;  Conduct relevant studies on potential market demand and the leasing customer base;  Facilitate cooperation with international business partners;  Raise awareness of the opportunities and benefits of leasing;  Fight against discredited leasing services and pseudo-leasing companies;  Promote the image of the Ukrainian leasing market in the international arena;  Create a training program under the Association and  Institutional development of the UUL with a view of preparing it for performing SRO functions.

Draft Law #6395 “On Financial Leasing” was registered in Verkhova Rada on April 19, 2017. On June 9, FST co-sponsored a roundtable entitled “Development of the Leasing Market of Ukraine: New Opportunities for Business, New Level of Consumer Rights Protection,” to discuss the draft law and to raise public interest. The event was organized with the Verkhova Rada Committee on

Financial Policy and Banking and the Discussion of the draft Law “On Financial Leasing” #6395, Ukrainian Association of Lessors. FST Project with the Rada Committee on Financial Policy and Banking Expert, Ivan Vyshnevskiy, delivered a and the Ukrainian Association of Lessors on June 7, 2017. presentation on the European experience of SME finance through leasing, and Mykola 17

Hrytsenko of the USAID Agricultural and Rural Development Support (ARDS) project discussed the importance of leasing to agrarian markets. Passage of a new law on leasing is important to expand access to financing for small and medium enterprises (SMEs) in Ukraine. The NBFI Team participated in a two-day conference on the regulation of financial leasing organized by the European Commission (EC) in cooperation with the Ukrainian Financial Services Regulator (FSR) on May 24-25, 2017. The primary aim of the conference was to provide information on best practices on the regulation of financial leasing in the EU. The FST Team supported UUL in development of recommendations on the draft Regulation “On The Register Of Entities, Which Are Not Financial Institutions, But Are Allowed To Provide Financial Leasing Services”, developed and published by the FSR. According to the Licensing Terms for providing financial services that were approved by the Cabinet of Ministers on December 7, 2016, requirements for licensing of leasing activities were established for the first time in the history of the leasing market. In fact, this licensing requirement means that the lessors have a "new era" of compliance

Ivan Vyshnevskiy, the USAID FST NBFI expert, conducts with the regulator. On June 21, 2017 the NBFI training on practical aspects of licensing requirements to team conducted a training on licensing issues leasing companies, June 21, 2017 that impact lessors. Representatives of 10 leasing companies (16 participants in total, and predominantly lawyers) attended the training in the FST's offices. The participants appreciated the content and quality of the training and asked for additional consultations. This training was the first one conducted under the training program developed for the UUL members based on their training needs assessment. Payday Lenders (PDL) The market for payday loans continues its expansive growth. An estimated UAH 4.2 billion were lent by financial companies and “other” credit institutions in the first quarter (January- March) 2017. However, due to inadequacies of the FSR reporting system, the real size of the market and the exact number players are still unknown. Most of the loans provided by payday lenders are not covered by the requirements of the law “On consumer lending”; this increases risk of consumer over-indebtedness. The FST Team initiated an in-depth study of international experience of microfinance, microlending, and payday lending, including an overview of the markets and key legal, regulatory, and oversight issues. The report will provide recommendations on development of microfinancing and microlending to SMEs in Ukraine and on an appropriate regulatory framework for payday lenders to protect consumers. SME Access to Finance The GFK Ukraine survey company submitted the results of the qualitative survey (10 focus groups and 20 in-depth interviews) on the perceptions of the Ukrainian public and SMEs’ of credit unions, payday lenders, pawn shops Presentation of the survey results “Non-Bank Financial and lessors. The FST Team conducted two Institutions of Ukraine through the Lens of Consumers”, presentations of the survey results “Non-Bank Lviv, June 16, 2017 Financial Institutions of Ukraine through the 18

Lens of Consumers” in Kiev on June 12, 2017 and in Lviv on June 16, 2017. These presentations initiated a series of media interviews, articles and video reports on the role of NBFIs’ services for the Ukrainian economy and population.

Planned Activities July-September 2017

During FY17 Quarter 4, the NBFI Component team will focus on the following activities: • Support the NBU on preparation for its NBFI regulatory role: - Finalize the high-level gap analysis of NBFI policies and regulatory requirements in comparison to EU Directives with the support of international NBFI Supervision Legal Advisor and develop recommendations for improvement of the current legal framework in accordance with applicable EU Directives/Regulations and principles of international standard-setting organizations; - Provide consultations on the definition and regulations of NBFIs according to the EU Directives and international practice; - Present the results of the study of international practices of regulation and supervision of credit unions through self-regulatory organizations (SRO) to the NBU, discuss and develop recommendations of the model of regulation of CUs through self-regulatory organizations in Ukraine; • Development of leasing sector: - Draft a scope of work (SOW) and select an international expert on leasing to conduct an analysis of Ukrainian leasing market and provide recommendations for its development; - Conduct training for the staff of members of UUL in accordance with the agreed upon training program; - Initiate discussion on the provisions of the Draft Law “On Financial Leasing” with the market and regulators to get it ready for the second reading in the Parliament; - Start preparation for an International Leasing Conference in Ukraine; • Microfinance: - Conduct study on international practices of microfinancing, microlending, and payday lending and provide recommendations on development of microfinancing and microlending to SMEs in Ukraine and recommendations on regulation framework for payday lenders to protect consumers, in particular, vulnerable population; • Expand public awareness of NBFIs: - Conduct presentations of the results of NBFI assessment including demand study to key stakeholders and public in Odessa and Kharkiv; - Development and publication of NBFI-related communication materials (articles, videos, brochures and other materials) including an article to the World Leasing Book.

D. DIGITAL FINANCE The Digital Financial Services (DFS) team completed its assessment of the sector and began its implementation activities in legal and regulatory reform, including support for the NBU’s cashless economy initiative, e-currency, financial inclusion, and public outreach.

Policy, Legal, and Regulatory FST is working closely with the NBU on several DFS issues. First, FST was asked to comment on an initiative undertaken by the NBU to consider blockchain technology as part of the NBU’s cashless strategy and as the basis for its eHryvnia strategy. FST provided the NBU with an overview analysis of issues in the utilization of blockchain technology in finance.

The materials on a possible blockchain pilot project, provided to FST by the NBU, were insufficient to offer a definitive recommendation on the proposed activity. FST suggested that the eHryvnia concept be considered within a wider technology framework and facilitated a presentation to the Acting NBU Governor and his senior staff on April 27-28 on fiat currency as an alternative to blockchain.

FST also pursued an active legal and regulatory agenda with respect to DFS. The DFS team began drafting Direct Debit and E-invoicing laws at the request of the NBU. These laws are essential to permit flexibility for businesses to charge (and withdraw) money electronically for utility bill payments. FST also provided suggestions to the NBU on Draft law #5361-d intended to facilitate e-commerce by NBFIs, was asked to comment on NBU Decree #878 on point-of-sale (POS) infrastructure, providing comments intended to spur the creation of more points-of-sale. FST also prepared an analysis of the impact that capping interchange rates had on e-commerce in Europe and in the US.

Pilot (Demonstration) Activities FST received a written request from the Ministry of Internal Affairs (MIA) of Ukraine to assist in developing a consumer to government (C2G) pilot activity for a range of payments made by Ukrainians through two of its independent bodies: the State Migration Service and the Service Center. The services they would like to digitize and make more efficient (and user friendly) include: issuance of passports and permits; vehicle registration, driving licenses, license plates, and vehicle clearances. FST verified that neither of these bodies was involved in law enforcement, and that the proposed services to be digitized were normal, civilian activities. FST will pursue this possible pilot activity in the next quarter.

FST continued discussions with the USAID/ARDS project on the development of a mobile application for payments arising from agricultural supply chains. Agricultural producers in rural areas are seriously underbanked, and in many cases lack even access to a bank or credit union. FST together with ARDS created a check-list of criteria to select a value chain suited for the pilot. FST will assume responsibility for designing the pilot and developing technical requirements for the digital solution (e.g., mobile wallet).

Public Awareness/Financial Inclusion During the Quarter FST organized or participated in multiple events to publicize and promote the benefits of a cashless economy and the financial inclusion of Ukrainians through the adoption of digital technology. FST organized events included: • A regular quarterly FST/Technology Group meeting with FST consultant Jordan Weinstock giving a presentation on mobile money, international experience and the case of M-Pesa; • On May 31, in cooperation with NABU, Rostyslav Dyuk presented the results of FST’s survey and focus group research on Ukrainian attitudes toward e- commerce, electronic payments, and cash. The event attracted over 70 participants from GOU regulators, retail bankers, payment services providers, Presentation of the Digital Finance Survey (in Cooperation with NABU; May 31, 2017, Kyiv) mobile operators, and the Ukrainian Interbank Association of Payment System Participants (EMA).

FST also carried out several other public awareness building activities: • Rostyslav Dyuk lectured on “What is Digital Finance?” to students of the Kyiv National Economic University (11 April 2017, 70 participants).

• Robert Bond, COP, was a featured panelist at the annual VISA cashless summit, opened by Acting NBU Governor Yakiv Smolii (May 18, 2017, 100 participants).

• On June 20 Rostyslav Dyuk was on the opening panel of the Bank-Online conference “Card Technology 2017.” The event gathered over 200 participants: retail bankers, payment services providers, mobile operators, National Bank of Ukraine.

• Launched a Facebook page about Digital Financial Services (more than

900 “Likes” by the end of June); Bank-Online conference “Card Technology 2017” (June 20, 2017, Kyiv) Planned Activities July – September, 2017 • Analyze the issues of the C2G and Government to Consumer (G2C) payments business and develop a concept of digitalization of payment streams; • Write and submit to the Verkhovna Rada Draft Laws on Direct Debit and E-invoicing; • Initiate the C2G payments pilot with the MIA for visas and motor vehicles registration and licensing; • Facilitate the signing of a Memorandum between Ukraine and Better Than Cash Alliance (BTCA); • Create and publicize the Quarterly Digital Finance Usage Index. Discuss the methodology of index with market participants and presentation of the Index to the market; • Carry out a pilot project with Visa to digitize payments for visas issued to Ukrainian citizens by the US embassy; • Organize and conduct a financial inclusion study tour to the USA for NBU and Ministry of Finance technical personnel. • Continue to explore a pilot project with the NBU on e-currency.

E. PENSION REFORM The FST project continues to support efforts to achieve a fairer, more balanced, and fiscally sustainable pension system for Ukraine. Work on pension reform during the quarter falls under three main categories: 1) policy and legal research and analysis; 2) strengthening the efficiency and capacity of the ICT function at the Pension Fund of Ukraine; and 3) public education outreach activities.

Policy and Legal Assistance

FST continued its analytical modelling of different pension scenarios for Ukraine, based on key assumptions of demographic, economic, workforce, contributions, and retirement ages. The results of the second stage of actuarial calculations and scenarios of proposed changes to the pension system were presented April 6, 2017 at a meeting of an independent expert working group on pension reform established by FST. The Expert Working Group was composed of GOU experts (the Ministry of Social Policy - MSP, PFU, NBU, Ministry of Finance), representatives from the International Monetary Fund (IMF) and World Bank, and leading academic experts. On April 25, 2017, a retreat was held featuring the members of the Expert Working Group and a wider audience (including staff of MPs, think tanks and institutes, the Trade Union Federation of Ukraine, the Employers Federation of Ukraine, the World Bank and the IMF) to try to forge consensus on recommended pension legislation. FST at plenary hearings on pension system reform held on June 7, 2017 in the Verkhovna Rada FST also prepared a written analysis of four alternative solidarity system reform options for Ukraine for the Verkhovna Rada Committee on Social Policy, Employment and Retirement for its plenary hearings held on June 7, 2017 in the Verkhovna Rada. The topic was “Importance of Compliance with Insurance Principles in Reforming the Pension System,” and FST was invited to attend.

Pension Legislation Chronology Cabinet of Ministers of Ukraine approves the draft law “On Amending Certain Laws of May 17, 2017 Ukraine Regarding Pensions Increase.” Plenary hearings in the Verkhovna Rada on the topic: “Importance of Compliance with June 7, 2017 Insurance Principles in Reforming the Pension System” (MPs, representatives of the central bodies of executive power, think tanks and CSOs). The GOU draft law “On Amending Certain Laws of Ukraine Regarding Pensions Increase” June 16, 2017 is considered at the meeting of the National Reform Council under the President of Ukraine. The GOU draft law “On Amending Certain Laws of Ukraine Regarding Pensions Increase June 22, 2017 is submitted to the Verkhovna Rada (registration No.6614). An alternative draft law on pension reform is submitted by MP Serhiy Kaplin from Petro June 23, 2017 Poroshenko’s Bloc (registration No.6614-1) The VR Committee on Social Policy, Employment and Retirement issues a draft VR June 30, 2017 Resolution recommending adoption of the pension system modernization legislation, Verkhovna Rada (registration No.6664).

FST experts also participated in several other fora on pension system issues. On April 10, FST participated in a meeting on the Ukrainian Pension System Modernization Concept organized by MP Natalia Korolevska, held in the Verkhovna Rada Committee on Social Policy, Employment and Retirement. On May 26, 2017 FST experts attended a roundtable on Implementation of the Mandatory Accumulation Pension System in Ukraine, conducted by the Verkhovna Rada Financial Policy and Banking Committee. FST Pension Expert, Natalia Goryuk, contributed to a draft law on private pensions prepared by a working group of the Financial Services Regulator and with the support of the NSSMC.

FST experts were also invited into a working group on Pillar II established by MSP at the end of June (chaired by the Deputy Minister of Social Policy Mykola Shambir.) The Prime

Minister, Volodymyr Groisman, instructed the Ministry to develop an action plan of Pillar II implementation in Ukraine.

FST prepared expert responses on pension questions from the Razumkov Ukrainian Center for Economic and Political Studies (on 06/02/2017) and information on the international experience on retirement provision for the military for MSP (on 06/13/2017).

Pension Fund of Ukraine FST subcontractor EY/Ukraine completed its “To Be” assessment of the Pension Fund of Ukraine’s (PFU) needs to improve its information technologies and started (with the support of external experts) preparation of documents for the procurement of server equipment and software for the PFU centralized information system.

Public Outreach MSP requested that FST assist in educating the public on the GOU's proposed modernization of the pension law. The request was for support with PSAs on the pension law, holding media educational events in Kharkiv and Odessa aimed at explaining the main provisions of a draft law amending the pension benefits provision, and for printing of materials and posters.

In support of the GOU’s public education communications campaign for pension system reform in Ukraine, the Project subcontracted the Center for Ukrainian Education Reform (CURE) to organize and implement the activity "Press Club on Current Issues of Pension Reform," in Kharkiv and Odesa cities. In addition, FST prepared appropriate hand-out materials - educational outreach materials on pensions for ordinary people to provide simple and clear information about the current Ukrainian pension system and proposed changes by the Government. Specifically, the Project wrote and designed the following materials: Pension System/Legislation Brochure; Pension System Fact Sheet; and Pension Legislation Q&A for journalists and others. An expert's guide on the main legislative provisions was also prepared. The content of the materials has been approved by the MSP, and each document is attributed to the MSP.

The Project launched a national public opinion survey to assess levels of knowledge about the pension system in Ukraine, to learn about attitudes and behavior regarding savings, investment and retirement. The survey also included questions on levels of trust in financial and government institutions related to retirement/pensions. The interviews for the pension survey were conducted in June. The survey results will be used as a baseline data for future measurement and evaluation, and also, to inform and build effective FST's public education and outreach activities in the pension/retirement area, including providing guidance on messages and developing PSAs, organizing series of press-conferences and roundtable discussions.

The Project will also prepare a monograph/a comprehensive white paper on the pension system based on our research and the survey results.

Planned activities July-September 2017 • Analyze the pension survey raw data and prepare a written publication based on results of this analysis • Participate in preparation of public information and educational materials on the changes to the pension system proposed by the GOU • Prepare 3-4 articles for printed media on the current situation in the pension system, changes proposed by the GOU and international experience on pensions • Participate in the work of the working groups on private pension (Pillar III) legislation improvement and preparation for Pillar II implementation • Continue to work with the PFU on the preparation of documents for a tender to procure the server equipment and software for the PFU centralized information system.

V. ADMINISTRATION / PROGRAM ISSUES AND LOOKING AHEAD

A. ADMINISTRATIVE ISSUES

The Project received an updated project registration card with new designated recipients. The recipients now are the Deposit Guarantee Fund, the Pension Fund of Ukraine, and the Ministry of Social Policy of Ukraine.

Recruitment for FST Project administrative staff has been almost completed. FST hired and IT Specialist and a Finance Assistant. A candidate for the Driver position has been finalized, and he will be hired once we receive a vehicle transfer from the USAID Municipal Energy Reform Project, which is currently pending CO approval.

Training on DAI’s Field Accounting System (FAS) was accomplished in June. Training on DAI’S TAMIS project management system has been postponed to late September due to the summer vacation schedule.

During April - June 2017 the following IT actions took place: server hardware and software installed, including email server, Microsoft update server and server backup application; communication equipment setup, including configuration of firewall and switches, secure always-on VPN connection between the project office and DAI headquarter established; IP telephony - VoIP - setup providing a cost-effective telephony service; shared printers and scanner installed.

B. MAJOR ACTIVITIES PLANNED FOR FY17-Q3 • Vehicle transfer from USAID MERP Project. • Staff training on DAI TAMIS project management systems. • Staff training on Ethics and Anti-Human Trafficking.

VII. ANNEXES

Annex 1 List of key documents produced by the FST Project Annex 2 Project Work Plan Annex 3 Monitoring table for key legislative acts Annex 4 Project Monitoring and Evaluation Plan

Annex 1: List of key documents produced by the FST Project

1 EY PFU IT Function Improvement Analysis

2 EY Overview Analysis – Split law

3 EY Regulatory Framework for NBFI

4 EY Overview and Analysis of Digital Finance Services Regulatory Framework

5 EY NSSMC IT Assessment – Final Report

6 FST Risk Assessment Plan – Final

7 FST Legal Harmonization – Final Report

8 FST Intervention Analysis - Revised

9 FST Gender Analysis and Strategy

10 FST NBFI Assessment Report – Revised

11 FST Analysis on Modeling Results of the Solidarity Pension System

12 FST DFS Assessment Report

13 FST EY Overview and Analysis of Draft Law 5361 on Governing Transfer of Funds

14 Review of an International Practices of Regulation and Supervision of Credit Unions Through Self-regulatory Organizations – Analytical Report

Annex 2: Work Plan

Counterpart FST Staff Apr17 May17 Jun17 Jul17 Aug17 Sep17 Deliverable Operations Adding new recipients: Pension Fund, Ministry Pension Fund, MSP, DGF, COP, DCOP, DFA MOU with PF and MSP of Social Policy, DGF/ update project USAID Ukraine signed, new registration registration card card issues End July Finalize and sign Protocol of Cooperation DGF COP, DCOP, Director of with Deposit Guarantee Fund Financial Literacy and Protocol of Cooperation Communications signed Completed Finalizing recruitment/hiring of long-term n/a HR/Office Manager, DFA CCN staff Staff hired 90% Completed Contextualized Field Operations Manual n/a Project Manager Manual End September Train local staff on DAI systems according to n/a Project Manager; Pavla Staff trained and familiar their function Cornejo with DAI systems End September Install IT system (server, client computers, IP n/a HQ IT Specialist - TBD, IT IT system installed phones, etc.) Manager Completed Initiate Finance and Accounting Systems (FAS) n/a HQ Systems operational and train appropriate staff Training completed

Pension Reform 1. Reform of the Solidarity Pension System 1.1 Refine actuarial calculations under pension MinFin, NBU, PFU, MSP, Report on Actuarial Goryuk, atsenko,Ukr STTA reform scenarios Inst. of Demogr., other Calculations Completed 1.2 Support the expert working group on MinFin, NBU, PFU, MSP, Minutes of PREWG Goryuk, Yatsenko pension reform Inst. of Demogr., other meetings Completed 1.3 Prepare a written analysis of the pension Ukraine’s Pension System system based on actuarial calculations under Inst. of Demogr. Goryuk, Yatsenko Analysis and Pension pension reform scenarios Reform Options Completed Comments on proposed 1.4 Provide legal analysis and comments on MSP Goryuk draft legislation on pension proposed draft legislation on pension reform reform In Progress 2. Pension Reform Outreach Analytical Report for POS 2.1 Analysis of pension reform public opinion MSP, PFU, Prime Min. and Focus Groups Goryuk, Yatsenko (POS) survey and Focus Groups Counsel Survey completed/Analysis In Progress Pension reform round 2.2 Provide technical support for round tables, MSP, PFU Yatsenko, Goryuk tables, press clubs and press clubs and conferences on pension reform conferences In Progress

Counterpart FST Staff Apr17 May17 Jun17 Jul17 Aug17 Sep17 Deliverable

Pension reform articles for 2.3. Prepare pension reform articles for mass MSP, PFU Yatsenko, Goryuk media prepared media In Progress Recommendations for 2.4 Provide technical support to the MSP, PFU Lozytska, Yatsenko, Goryuk pension reform video spots production of pension reform video spots In Process 3. Support for IT Development of the PFU Procurement plan developed and 3.1 Finalize IT assessment of the Pension Fund PFU Goryuk, Kotukhova, STTA procurement process of Ukraine and initiate procurement plan started In Process Draft recommendations for amendment of the Law on 4. Assist NSSMC on the bill on Amending the NSSMC, FSR Goryuk Non-State Pension Law on Non-State Pension Provision Provision In Process

NBFI 1.Legal and Regulatory Reform/Support for

Split 1.1 High level gap analysis of NBFI policies and Diagliev, Burlaka, Gap analysis Draft send to NBU Strategy and Reform regulatory requirements in comparison to EU Vyshnevskiy, Vitka NBU/Pending Review by Dept. Directives STTA international expert NBU Strategy and Reform Vyshnevskiy, Ilina, Vitka, Roadmaps In Progress 1.2 Roadmaps on the NBFI markets regulation Dept. STTA Recommendations 1.3 Inputs to working groups on draft laws on EY, CAP, UUL, NBU, DGF, Diagliev, Vyshnevskiy, Ilina, Comments provided on leasing credit unions, financial leasing and other NBFI VR Banking and Finance Vitka law, CU analysis provided to related draft legislation Committee CAP 1.4 Research of international practices related Presentation/report on Associations of financial Colleen Green, Ilina, to regulation of and consumer protection issues global best practices In companies Vyshnevskiy of payday and microfinance lenders Progress 2. Access to NBFI Finance for SMEs 2.1 Strategy of the development of Association Strategy Completed and UUL, LCs Ilina, Vyshnevskiy “Union of Ukrainian Lessors” discussed with UUL UUL, LCs Presentation/report on 2.2 Research of international best practices STTA global best practices In related to leasing market development Progress, need consultant

Counterpart FST Staff Apr17 May17 Jun17 Jul17 Aug17 Sep17 Deliverable 2.3 Establishment of training activities under the UUL, LCs Training materials Ilina, Vyshneivskiy UUL and trainings for the leasing staff First training event held UUL, LCs Public events, articles, video 2.4 Improve SME awareness of leasing finance Ilina, Vyshnevskiy, Public spots, etc Media outreach Outreach Team started – video interview 2.5 Improve credit products for SME of partner Passports of credit products Partners CUs Vyshnevskiy, Ilina credit unions Public events, articles, video 2.6 Improve SME awareness of credit union Ilina, Vyshnevskiy, Public CAP, CUs spots, etc. Outreach events financing Outreach Team held 3. Raising Public Awareness of NBFIs 3.1 Presentation of the results of NBFI Ilina, Vyshnevskiy, Public Presentation Events held in NBFI associations assessment study Outreach Team Kiev, Lviv, Odessa 3.2 Publishing of NBFI related communication Ilina, Vyshnevskiy, Public Articles, videos, brochures UWF, others and literacy materials Outreach Team and other IEC materials

Capital Markets 1. Implementation of IT management processes 5 Remedial Initiatives EY, NSSMC Kotukhova, Nemoliuk for NSSMC Implemented In Progress Reorganization Report 2. Coordination support for development of US SEC, NSSMC, PWC, EY Bond, Vitka, Nemoliuk PwC doing this; FST may business processes for NSSMC facilitate SEC Review 3. Legal support regarding draft laws on Legal analysis of Law 6303, NSSMC powers and institutional independence other laws NSSMC, VR Vitka, Grischenko (mapping and comparing with international Completed standards) 4. Legal support and recommendations for Memo/recommendations In NSSMC Vitka, Grischenko modifications to draft Derivatives law if needed Progress 5. Roundtable discussions of capital markets Event held NSSMC Yulia Vitka, Grischenko laws Shifted to Sep-Nov, 2017 6. Organize US SEC work on implementation NSSMC, US SEC, market Week-long Conference Bond, Vitka, Nemoliuk of Corporate Governance plan in Ukraine participants Event held, June 19-23 7. Coordinate CFTC’s assistance on Action Plan developed commodity and futures markets development NSSMC, CFTC Bond, Vitka, Nemoliuk In Progress for Ukraine 8. Support the UAIB Investment Annual Conference held NSSMC, UAIB Robert Bond Conference Completed

Digital Finance 1. Market Research and Sector Assessment

Counterpart FST Staff Apr17 May17 Jun17 Jul17 Aug17 Sep17 Deliverable 1.1 Develop and provide Sector Assessment DFS Market Assessment Report N/A Dyuk, Bilous Report Completed Apr 30, 2017 2. Public Awareness Campaign 2.1 Develop DFS Facebook Page to highlight DFS Facebook Page (# of N/A Dyuk, Bilous key public awareness themes Likes) 900+ 2.2 Design, develop, and produce mass market Design Mass Market DFS on line course on digital finance and distribute Prometeus (TBD) Dyuk, Bilous Course Presented to 500 it via online learning platforms (Prometeus) individuals In Progress 2.3 Post videos from the events we are 2 videos N/A Dyuk, Bilous speaking at 2.4 Quarterly publications in sector media Sector Media (TBD) Dyuk, Bilous 3 publication 2.5 Report on Internet-banking N/A Dyuk, Bilous Report to market 2.6 Share Gfk demand side report with the Report to market Event held GfK Dyuk, Bilous market (organized as providers meet-up) with NABU 2.7 Signing Ukraine to Better Than Cash BTCA, MinFin, MinEcon, Signed Memorndum Dyuk, Bilous Alliance (BTCA) NBU Discussions continuing 2.8 NBU experts go to an international DFS 1-2 visit NBU & MinFin study NBU Dyuk, Bilous conference tour in September 2.9 Participation in conferences (CIS Bankers 2-3 conference Completed Bank online Dyuk, Bilous and Bank online) 2.10 Lectures at the universities (in 1-3 lectures Completed NBU Duyk cooperation with the NBU) 3. Ecosystem Development and Market

Facilitation 3.1 Work with stakeholder to develop MinFin, MinEcon, NBU, Roadmap In Progress comprehensive DFS roadmap Banks, Financial Services Dyuk, Bilous Providers 3.2 Develop quarterly workshop series to Initial DFS Stakeholder Banks, Financial Services bring together stakeholders and international Dyuk, Bilous Workshop Completed Providers experts to discuss DFS trends and issues 3.3 Work with newly formed Innovation Park 3-4 new startup, 4-5 new Kyiv Innovation Unit Park (Unit) to organize Ukrainian Hack-a-thon to Dyuk, Bilous DFS product In Progress (TBD) develop solutions for specific DFS areas 3.4 Develop business cases highlighting market Business cases developed value of serving currently underserved segments and provide analysis to selected MinFin, MinEcon, NBU Dyuk, Bilous service providers (disseminate findings at one of the quarterly workshops

Counterpart FST Staff Apr17 May17 Jun17 Jul17 Aug17 Sep17 Deliverable 3.5 Design pilot plans for e-money pilot or MinFin, MinEcon, NBU, Pilot designed Support for Direct Debit Utility Pilot Banks, Financial Services Dyuk, Bilous ecurrency pilot provided Providers (TBD) 3.6 Design Citizen to Government payment MinFin, MinEcon, NBU, Pilot designed Discussions analysis and pilot Banks, Financial Services Dyuk, Bilous with MIA underway Providers (TBD) 3.7 Design Government to Citizen Payment MinFin, MinEcon, NBU, Pilot designed Initial Analysis and Pilot (Pensioners) Banks, Financial Services Dyuk, Bilous documents to USAID on IDP Providers, UkrPoshta (TBD) & Pension payments 4. Enabling Regulatory Environment - NBU

Support 4.1 NBU Capacity Building (trainings, study Trainings, Study tours tours) NBU Dyuk, Bilous, Burlaka provided Study tour designed/proposed 4.2 Legislation and Regulatory Strategy Draft Law 5361 is read in Market, Regulators Dyuk, Bilous, Burlaka Development Parliament Read but rejected

Public Confidence in the Financial Sector 1.Implementation of the Law "On consumer lending" (1734-VIII) 1.1 Support drafting of regulations required by Improved Regulations NABU, FSR Burak, Yaschenko, Vitka the Law Completed 1.2 "Mystery shopping" survey (prior to the Survey conducted STTA, Burak, Lozytska Law effective date) Completed Results of the survey 1.3 Public event for main stakeholders and the NBU, NABU, NGOs Burak, Lozytska presented September 12 media to present survey results Event 2. Support of the effective Financial Consumer protection regime in Ukraine 2.1 Promotion of the Draft Law "On Burak, Yaschenko, Vitka, consumer protection" (2456-д) (publications, NABU Publications Arestarhov legal comments, media) 2.2 Research on international best practices in Research Paper on Burak, Yaschenko, Vitka, financial consumer protection regulation, and NBU international best practices STTA recommendations for Ukraine Completed 2.3 Public discussions on international best NBU, market participants, Public events conducted practices in financial consumer protection and Burak, Lozytska NGOs September 12 event recommendations for Ukraine 3. Financial ombudsman establishment

Counterpart FST Staff Apr17 May17 Jun17 Jul17 Aug17 Sep17 Deliverable 3.1 Discussion of the Concept with the Input from the market representatives of banking sector, NBFIs, NABU, associations Burak, Vitka Completed market associations 3.2 Discussion of the concept, opportunities, potential funding of Financial ombudsman Discussions with Donors Burak, Viyka, Bond launch with the Donors (e.g. WB/ EBRD/ EU/ held Completed GIZ/ other) 3.3 Finalizing the Draft Law "On the Financial The Draft Law "On the ombudsman" and presenting it to the Financial ombudsman" NBU, NABU, NGOs Burak, Yaschenko, STTA Verkhovna Rada Financial Policy and Banking finalized To Be Presented Activity Committee September 12 3.4 Promoting the Draft Law and the idea of NABU, insurance Informational campaigns Burak, Lozytska Financial ombudsman in media associations, NGOs held T Burak article published 4. Ukrainian Women’s Fund Program on

Financial Empowerment 4.1 Conduct Launch Events in 11 oblasts to Launch events conducted UWF Tatarynova, Lozytska publicize the training program Done Trainings and consultations delivered: 120 two-day 4.2 Conduct training and counseling program UWF Tatarynova, Lozytska trainings; 360 hours of couns.; 2400 people trained In Progress Workshops, lectures, 5. Assist with conducting financial awareness round tables conducted NBU Lozytska, Arestarhov road-shows in regions of Ukraine Planned - 4 cities starting September 18 6. Develop multi-media Public Outreach Lozytska, Arestarhov, Strategy developed In

Strategy Tatarynova Progress 7. Public Outreach and Education on Pension

Issues Survey results Raw data 7.1 Pension Reform Survey Yatsenko, Lozytska being analyzed Yatsenko, Lozytska, Messages designed and 7.2 Develop and test Pension Reform messages CabMin, MSP Arestarhov tested Moved to August PSAs produced and 7.3 Produce PSAs on Pension Reform CabMin, MSP Yatsenko, Lozytska broadcast August -September Events conducted 8 events 7.4 Conduct national and regional public events Goryuk, Lozytska, CabMin, MSP, PFU for journalists planned, July - on pension issues Arestarhov September 7.5 Publicize Pension Survey results Public Presentation PFU, MSP Lozytska, Yatsenko conducted TBD

Counterpart FST Staff Apr17 May17 Jun17 Jul17 Aug17 Sep17 Deliverable 8. Public opinion survey on deposit insurance Survey conducted In process DGF Lozytska system 9. Focus Area Events Component Leads Arestarhov, Lozytska 9.1 Public presentation of demand side report Public Presentation Lozytska, Dyuk on DFS conducted Completed 9.2 Presentation of NBFI assessment study NBFI associations Ilina, Vyshnevskkiy, Lozytska Public Presentation conducted Completed 9.3 Round table discussion on Derivatives Law Grischenko, Nemoliuk, Round table conducted NSSMC Lozytska September 9.4 Publications (articles, op-eds, editorials, Publications prepared and etc.) on consumer finance and consumer published in the media On- Component Leads Arestarhov, Lozytska protection, NBFI, DFS, capital markets, pension going high coverage of FST issues activities

Annex 3: Monitoring table for key legislative acts (as of June 30, 2017)

Opinion of the Bill No. and Relevant Central # Bill name Introduction Sponsor committee Progress Comments Scientific and Date (dd.mm.) action Expert Office Passed as a whole – Pending Signature

Pending Second Reading 1. On Amending Certain Laws of Ukraine (Regarding 3498 Members of Ukrainian Parliament: To be passed To be passed as Passed its first reading Pending second Regulated Markets and Derivatives)1 Demchak (PPB); on repeated a basis and (31.03.2016) reading. 20.11.2015 Dovbenko (PPB); second reading subsequently Committee on Financial The bill is prepared on Rizanenko (PPB); and as a whole modified in Policy and Banking. 10.04.17 solely on … (14.06.16) accordance with Draft Resolution of Sending the Bill for derivatives, without and also MPs from RPOL, To be returned comments and Repeated Second Reading (3498/П1, provisions on NSSMC PF, PP, Batkivshchyna; Self-Help and for repeated proposals dated 10.04.2017) powers. RP second reading (09.12.15) To be reported by - (04.04.17) S.Rybalka 2. On Amending Certain Laws of Ukraine Regarding the 2413а President of Ukraine (urgent) The Verkhovna Support the Passed its first reading Pending second Consolidation of Functions of State Regulation of Financial Rada of passage. 7 07.07.16. reading. Services Markets2 20.07.2015 Ukraine (VRU) comments and Committee on Financial should vote in proposals Policy and Banking. favor of one of provided. the decisions (10.09.15) provided by the first part of Article 114 of the VRU Rules of Procedure. (15.09.2015) 3. On Amending Certain Laws of Ukraine Regarding the 2456-д Members of Ukrainian Parliament: To be passed Central Leagal Passed its first reading Under preparation Improvement of Financial Services Consumer Protection3 Rubalka (RPOL). on second Office: 31.03.16. for repeated second 29.12.2015 reading and as The bill is Committee on Financial reading a whole endorsed with Policy and Banking. (11.05.15) comments For repeated second (13.06.16) reading 15.11.16 To be reported by - S.Rybalka.

4. On Digital Trust Services4 4685 Cabinet of Ministers of Ukraine To be passed To be passed on Passed its first reading Second reading is as a whole as first reading and 20.09.16. postponed. 17.05.2016 revised by the modified in Committee on 20.06.17 Committee accordance with Informatization and

1 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=57159 2 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=56124 3 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=57617 4 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=59139

Opinion of the Bill No. and Relevant Central # Bill name Introduction Sponsor committee Progress Comments Scientific and Date (dd.mm.) action Expert Office (15.12.16) comments Communications. (27.05.16) Under preparation for repeated second reading. О.Donchenko 5. On Amending Certain Laws of Ukraine Regarding Money Transfer Regulation5 5361 Members of Ukrainian Parliament: To be passed Comments on Under consideration by the Pending first reading Demchak (PPB); as a basis the bill Committee on Financial Officially not revoked. 04.11.2016 Dovbenko (PPB); (23.02.17) (06.02.17) Policy and Banking. Bill 5361-д was rejected Rizanenko (PPB); Included in the agenda for and removed from … 14.03.17.- returned for consideration on and other MPs from Self-Help; repeated first reading. 20.06.17 RPOL; PP. To be reported by - S.Rybalka. Pending First Reading 6. On Amending Certain Laws of Ukraine (Regarding 5592 Members of Ukrainian Parliament: To be passed To be passed as Under consideration by the Pending first reading Disclosures in the Stock Market, the Improvement of the Rizanenko (PPB); as a basis a basis with Committee on Financial Securities Issuance Procedure and Expansion of 23.12.2016 Demchak (PPB); (07.02.17) comments Policy and Banking. Opportunities to Raise Capital)6 Poliakov (PF); (06.02.17) Included in the agenda for Dovbenko М.В. (PPB); 14.03.17.- returned for And other MPs (IND, PPB, PP) repeated first reading. To be reported by - S.Rybalka. Not Included in the Agenda 7. On Amending Certain Laws of Ukraine Regarding the Protection of Investors 6303 Members of Ukrainian Parliament: Not available Based on results Under consideration by the Not included in the against Capital Market Abuses7 Rizanenko П.О. (PPB); of first reading Committee on Financial agenda 06.04.2017 Poliakov (PF); consideration, it Policy and Banking 06.06.17 Demchak (PPB); is advisable to Ivanchuk А.V. (PF); refer back for Dzenzersky D.V. (PF). improvement, taking into account comments and proposals given (02.06.17) Rejected and Removed from Consideration or Recalled by Sponsor 8. On Amending Certain Laws of Ukraine Regarding Money Transfer Regulation8 5361-д Members of Ukrainian Parliament: To be passed Not available Pending first reading. Rejected and Rubalka (RPOL). as a basis Committee on Financial removed from 07.04.2017 (04.04.17) Policy and Banking. consideration 20.06.

5 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=60425 6 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=60801 7 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61521 8 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=5361-%E4&skl=9

Capital Markets Bills Monitoring Table (as of June 30, 2017)

Opinion of the Bill No. and Relevant Central # Bill Name Introduction Sponsor Committee Progress Comments Scientific and Date (dd.mm.) Action Expert Office Passed as a Whole, under Preparation for Signature, Pending Signature or Signed by the President of Ukraine 1. On Amending Certain Laws of Ukraine Regarding the 2302а-д Members of Ukrainian Parliament: To be passed as Not Available Pending First Reading On joint stock Improvement of Corporate Governance in Joint Stock V. Yu. Ptashnyk (IND); a basis Committee on Economic companies and Companies 28.04.2016 Yu. I. Solovey (PPB); (20.04.16) Policy. corporate governance V.V. Kryvenko (PF); Passed as a basis on S.O. Fayermark (PF); 17.01.17. A.V. Ivanchuk (PF); Passed as a whole on A.P. Denysenko (IND); 23.03.17. A.V. Koshelyeva (RPOL); Signed by the President of Yu. M. Voropayev (OB); Ukraine on 01.06.17 O.S. Dovgyi (PP). 2. On Amending Certain Laws of Ukraine Regarding Corporate Contracts9 4470 Members of Ukrainian Parliament: To be passed as To be returned Pending its first reading. V. Yu. Ptashnyk (IND); a basis for improvement Committee on Economic 19.04.2016 V.M. Kryvenko (PPB, був-Self- (20.04.16) (26.04.16) Policy. Help); Passed as a basis on G.A. Shverk (PPB) ; 17.01.17 B.M. Matkivskyi (PPB) ; Passed as a whole on Yu. I. Solovey (PPB); 23.03.17 P.O. Rizanenko (PPB); Submitted for signature to A.I. Shkrum (Batkivshchyna); the President of Ukraine on I.V. Gerashchenko (PPB); 03.04.17 P.M. Kyshkar (Self-Help); S.O. Fayermark (PF); O.V. Romanovskyi (PF); R.Ye. Demchak (PPB). Pending Second Reading 3. On Limited and Additional Liability Companies10 4666 Members of Ukrainian Parliament: To be passed on To be returned Committee on Economic Corporate governance A.V. Ivanchuk (PF); second reading for improvement Policy. 13.05.2016 B.M. Matkivskyi (PPB) ; and as a baisis (01.06.16) 25.05.17 – returned for Yu. I. Solovey (PPB); (25.05.17) Legal Office: repeated second reading. V. Yu. Ptashnyk (IND); Approved without V.V. Kryvenko (PF); comments O.V. Romanovskyi (PF); (12.04.17) A.P. Denisenko (IND);

and other MPs from PF, OB, PP, PPB, Self-Help.

Under Preparation for Second Reading 4. On Amending Certain Laws of Ukraine Regarding 0956 Cabinet of Ministers of Ukraine To be passed on To be passed as a Passed its first reading Under preparation Securities Issue11 second reading basis taking into 10.10.13. by the Committee

9 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=4470&skl=9 10 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=4666&skl=9 11 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=52408

Opinion of the Bill No. and Relevant Central # Bill Name Introduction Sponsor Committee Progress Comments Scientific and Date (dd.mm.) Action Expert Office 20.01.13 (22.07.14) account the Pending second reading for second reading (as revised on provided Committee on Financial 27.11.2014) proposals – 9 Policy and Banking comments (29.03.13) 5. On Amending Certain Laws of Ukraine (Regarding the Simplification of 5592-д Members of Ukrainian Parliament: Not available Not available Under consideration by the Under preparation for Running Business and Attracting Foreign Investments by Securities Issuers)12 S.V. Rybalka (RPOL) Committee on Financial second reading 20.04.2017 Policy and Banking. Passed its first reading 20.06.17.

Pending Second Reading 6. On Amending Certain Laws of Ukraine Regarding 1652 Members of Ukrainian Parliament: To be passed as Supports its Pending its first reading Consumer Rights Protection in Financial Services Market13 M.A. Poliakov (PF). a basis passage on first Committee on Financial 26.12.2014 (02.06.15) reading Policy and Banking (21.04.15) 7. On Amending the Law of Ukraine on Advertising 2077a Members of Ukrainian Parliament: To be passed as To be passed as a Pending its first reading. Anoticorruption (Regarding Requirements for Consumer Lending O.B. Feldman (IND) a basis basis on first Committee on Freedom of opinion: Advertising) 15.06.2015 (07.10.10) reading, taking in- Speech and Information The Bill does NOT to account Policy. meet the requirements comments made Included in the agenda for of anticorruption (08.09.15) 13.04.17 – not considered. legislation To be reported by - (07.10.15) V.Syumar 8. On Amending Certain Laws of Ukraine to Improve Legal Regulation of 3427 Members of Ukrainian Parliament: Not Available Not Available Under consideration by the About joint-stock Corporate Relations14 A.V.Pomazanov (PF); Committee on Economic companies and 06.11.2015 Policy corporate governance 9. On Amending the Law of Ukraine on Arbitration Courts 3660 Members of Ukrainian Parliament: To be passed as May be passed as Pending its first reading to Bring it into Conformity with Requirements of S.O. Alieksieiev (PPB); a basis a basis Included into agenda for International Arbitration Rules15 17.12.2015 R.M.Sydorovych (Self-Help); (27.01.16) (24.12.15) 14.07.16 – not considered. G.V. Logvynskyi (PF); Committee on Legal Policy R.S. Romaniuk (PPB); and Justice. V.P. Ianitskyi (PPB). 10. On Restructuring Liabilities of the Ukrainian Citizens under 4004-1 Members of Ukrainian Parliament: Failed to make a Comments Committee on Financial Foreign Currency Consumer Loans16 O. Yu.Vilkul (OB); decision. without any Policy and Banking 17.02.2016 D.V. Dzenzerskyi (PF). Recommended recommendations For repeated first reading to the VRU to regarding passage (12.04.2016) # 4004 was make a decision (15.03.16) recalled by CoM (14.04.16) by voting (15.03.16) 11. On Amending the Law of Ukraine on Adevertising 4924 Members of Ukrainian Parliament: To be passed as May be passed as Pending its first reading Under preparation (Regarding Strengthening the Regulation of Radio and TV 07.07.2016 V.V. Sevriukov (PPB) a basis and as a a basis Committee on Freedom of for repeated first

12 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61673 13 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=53212 14 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=56970 15 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=57458 16 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=58198

Opinion of the Bill No. and Relevant Central # Bill Name Introduction Sponsor Committee Progress Comments Scientific and Date (dd.mm.) Action Expert Office Advertising of Services Related to Raising Financial whole (17.10.16) Speech and Information reading Resources from Households, Construction Sites and (19.10.16) Policy Securities and Stock Market on Radio and TV)17 12. On Amending the Law of Ukraine on State Regulation of 4956 Members of Ukrainian Parliament: To be passed as To be passed as a Under consideration by Securities Market of Ukraine (Regarding Streamlining the P. O. Rizanenko (PPB) a basis basis on first Committee on Financial Procedures for Collecting Fines Imposed on Legal Entities 12.07.2016 (17.01.17) reading Policy and Banking for Violations in Securities Market)18 (22.09.16) 13. On Amending Certain Laws of Ukraine (Regarding Protecting Investments and 1048 Members of Ukrainian Parliament: To be passed as To be passed as a Pending its first reading. Securing the Activities of Limited Liability Companies) S.G. Mishchenko (IND) a basis basis on first Committee on Legal Policy 27.11.2014 (20.05.15) reading and Justice. (22.04.15) Included in the agenda for 08.06.17. Under Consideration by Committees 14. On Agricultural Cooperation19 6527 Members of Ukrainian Parliament: Not available Not available Under consideration by the Inclusion criteria: “Key S.P. Labaziyk (PP); Committee on Agrarian Laws for the Agrarian 31.05.2017 O.B. Bakumenko (PPB); Policy and Land Relations sector” V.V. Galasiyuk (RPOL); O.I. Kylinich (RP);

and other MPs from PPB, Self-Help, PF, PP

15. On Amending Certain Laws of Ukraine Regarding the Activities of the 6539 Members of Ukrainian Parliament: Not available Not available Under consideration by the Stock market Settlement Center for Servicing Stock Market Contracts20 M.V. Dovbenko (PPB); Committee on Financial 02.06.2017 O.O. Zholobetsky (PPB); Policy and Banking S.V. Rybalka (RPOL). 16. On Amending Certain Laws of Ukraine to Improve Investment Climate in 6540 Cabinet of Ministers of Ukraine Not available Not available Under consideration by the Corporate governance, Ukraine21 Committee on Economic banks 06.06.2017 Policy

17. On Amending the Law of Ukraine on Public Procurement Regarding the 6633 Members of Ukrainain Parliament: Not available Not available Under consideration by the Removal of Barriers to Competition in the Financial Services Market22 V.S. Kurylo (PPB); Committee on Economic 22.06.2017 A.O. Reka (PF); Policy S.V. Rybalka (RPOL); D.V. Dzenzersky (PF). Not Included in the Agenda 18. On Amending Certain Laws of Ukraine Regarding the Improvement of 6428 Cabinet of Ministers of Ukraine Not available To be passed on Under consideration by the Not included in the Corporate Governance of Legal Entities Whose Shareholder (Founder, first reading Committee on Economic agenda on 06.06.17. Member) Is the State23 10.05.2017 (24.05.17) Policy.

17 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=59584 18 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=59653 19 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61932 20 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61945 21 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61950 22 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62115 23 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61755

DFS Bills Monitoring Table

Opinion of the Bill No. and Relevant Central # Bill name Introduction Sponsor committee Progress Comments Scientific and Date (dd.mm.) action Expert Office Passed as a Whole – Pending Signature

Pending Second Reading

Under Preparation for Second Reading

Pending First Reading 1. On Amending Certain Laws Regarding Money Transfer 3669 Members of Ukrainian Parliament: To be passed as Support Pending first reading. Services24 17.12.2015 S.V. Rybalka (RPOL); a basis (25.03.16) Committee on Financial M.V. Dovbenko (PPB); (30.03.16) Policy and Banking. I.G. Fursin (PP); Included in the agenda for V.M. Romanyuk (PF); 15.11.16 – not considered. M.A. Poliakov (PF). To be reported by - L.M. Klimov (RP). S.Rybalka 2. On Special Features of Paying Bank Fees and Fees of Other 4631 Members of Ukrainian Parliament: The Committee Support the bill, Under consideration by the Institutions for Accepting and Transferring Money for O.V. Kuzhel (Batkivshchyna); recommends taking into Committee on Financial Housing and Utility Services25 10.05.2016 I.G. Kyrylenko (Batkivshchyna); the Parliament account the Policy and Banking Yu.V. Tymoshenko to decide by comments made. (Batkivshchyna); and 10 more taking a vote. (09.11.16) members of the (17.01.17) Batkivshchyna faction

Under Consideration by Committees 3. On Amending Article 207 of the Civil Code of Ukraine Regarding Entering into 5529 Members of Ukrainian Parliament: Not available Not available Under consideration by the Agreements by Putting an Electronic Signature on the Sensor Screen26 V.M. Kupry (IND); Committee on Legal Policy 12.12.2016 T.I. Batenko (IND). and Justice 4. On Amending Certain Laws of Ukraine Regarding Entering 6028 Members of Ukrainian Parliament: Not available To be referred Under consideration by the into Contracts in the Form of an Electronic Document27 R.Ye. Demchak (PPB); back for Committee of Financial 03.02.2017 V.P. Yanitsky (PPB); improvement Policy and Banking P.O. Rizonenko (PPB); (15.05.17) R.M. Sidorovych (Self-Help). 5. On Amending the Law of Ukraine on Payment Systems and 6573 Members of Ukrainian Parliament: Not available Not available Under consideration by the Money Transfers in Ukraine Regarding the Commission S.I. Kiral (Self-Help); Committee of Financial Fee for Acquiring28 09.06.2016 T.G. Ostrikova (Self-Help) Policy and Banking O.V. Kuzhel (Batkivshchyna); M.V. Dovbenko (PPB) V.V. Galasiyuk (RPOL)

24 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=57468 25 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=4631&skl=9 26 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=60701 27 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61057 28 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61996

Opinion of the Bill No. and Relevant Central # Bill name Introduction Sponsor committee Progress Comments Scientific and Date (dd.mm.) action Expert Office and other members of Parliament from Self-Help, RPOL, PPB, PF, Batkivshchyna. 6. On Amending Certain Laws of Ukraine Regarding Financial Services in Mailing29 6601 Members of Ukrainain Parliament: Not available Not available Under consideration by the V.S. Kurylo (PPB); Committee of Financial 21.06.2017 S.V. Rybalka (RPOL); Policy and Banking A.O. Reka (PF); M.A. Poliakov (PF) D.V. Dzenzersky (PF).

Non-Bank Financial Institutions and Services (NBFI) Bills Monitoring Table

Opinion of the Bill No. and Relevant Central # Bill name Introduction Sponsor committee Progress Comments Scientific and Date (dd.mm.) action Expert Office Passed as a Whole – Pending Signature

Pending Second Reading 1. On Banning Pyramid Investment Schemes in Ukraine30 0959 Cabinet of Ministers of Ukraine To be passed To be passed as a Passed its first reading on as a basis basis and modified 19.11.13. 27.11.2014 (18.06.13) in accordance Committee on Financial with 5 subsequent Policy and Banking. comments and proposals (11.06.13) Under Preparation for Second Reading 2. On Insurance 31 1797-1 Members of Ukrainian Parliament: To be passed To be passed as a Passed its first reading M.A. Poliakov (PF); as a basis basis and modified (31.03.2016) 06.02.2015 S.V. Rybalka (RPOL); (19.05.15) in accordance Under preparation for O.V. Lavryk (Self-Help) with subsequent second reading. O.O. Zholobetsky (PPB); comments and Committee on Financial V.M. Romanyuk (PF); proposals Policy and Banking. P.O. Rizanenko (PPB); (08.05.15) S.V. Martyniak (PP); B.Yu. Kozyr (PPB). Pending First Reading 3. On Amending the Tax Code of Ukraine Regarding the 2414а President of Ukraine To be passed as To be passed if It was decided to use the Consolidation of Financial Services Markets State Regulation a basis if bill 2413а passes shortened procedure Functions32 20.07.2015 2413а passes (01.09.15) (12.05.16). (16.09.15) Committee on Tax and Customs Policies

29 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62068 30 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=52411 31 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=53904 32 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=56125

Opinion of the Bill No. and Relevant Central # Bill name Introduction Sponsor committee Progress Comments Scientific and Date (dd.mm.) action Expert Office 4. On Amending Certain Laws of Ukraine Regarding Ensuring 3856 Members of Ukrainian Parliament: To be passed Support the Pending its first reading. Equal Conditions of Providing Financial Services33 V.M. Romanyuk (PF); as a basis passage on first Committee on Financial 01.02.2016 O.O. Zholobetsky (PPB). (30.03.16) reading Policy and Banking. (25.02.16) 5. On Audits of Financial Statements and Auditing34 6016 Cabinet of Ministers of Ukraine To be passed as To be referred Pending its first reading. Under preparation a basis back for Under consideration by the for repeated first 03.02.2017 (24.05.17) improvement Committee on Tax and reading. (24.05.17) Customs Policy Under Consideration by Committees 6. On Life Insurance Contract Benefits Guarantee Fund35 0958 Cabinet of Ministers of Ukraine To be passed as To be passed as a Under consideration by the Insurance a basis basis on first Committee on Financial 27.11.2014 (02.04.2013) reading and Policy and Banking modified in accordance with comments made (28.03.2013) 7. On Amending Certain Laws of Ukraine Regarding State 1517 Members of Ukrainian Parliament: Not available Not available Under consideration by the Financial Support to Credit Unions with the Aim to Return S.M. Kaplin (PPB). Committee on Financial Deposits (Contributions)36 19.12.2014 Policy and Banking 8. On Amending Article 140 of the Tax Code of Ukraine 1811 Members of Ukrainian Parliament: Not available Support the Under consideration by the (regarding special features of the taxation of financial leasing I.S. Alexeyev (PF). purpose of Committee on Tax and transactions)37 22.01.2015 passage, refer to Customs Policy the Government for opinion (20.04.15) 9. On Amending the Law of Ukraine on Financial Services and 2021 Members of Ukrainian Parliament: Not available Support, in Under consideration by the State Regulation of Financial Services Markets (regarding M.A. Poliakov (PF); general Committee on Financial the use of special restrictive actions)38 04.02.2015 V.Ye. Ivchenko (Batkivshchyna); Policy and Banking G.G. Krivosheya (PF); (21.05.15) T.Z. Yurik (PPB); V.M. Kupriy (IND); M.V. Gavrilyuk (PF). 10. On Amending the Law of Ukraine on Financial Services and 3441 Members of Ukrainian Parliament: Not available To be passed as a Under consideration by the State Regulation of Financial Services Markets Regarding M.V. Dovbenko (PPB); basis with Committee on Financial Fianncial Leasing39 10.11.2015 M.A. Poliakov (PF); subsequent Policy and Banking A.S. Matviyenko (PPB); modification in R.M. Solvar (PPB). accordance with comments and proposals – 63

33 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=58004 34 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61045 35 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=52410 36 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=53004 37 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=53659 38 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=53821 39 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=57009

Opinion of the Bill No. and Relevant Central # Bill name Introduction Sponsor committee Progress Comments Scientific and Date (dd.mm.) action Expert Office comments (15.12.15) 11. On Restructuring Ukrainian Citizens’ Foreign Currency 4004-2 Members of Ukrainian Parliament: Not available The Office has 12 Under consideration by the Loans Debt 40 O.Yu. Vilkul (OB); comments Committee on Financial 22.04.2016 D.V. Dzenzersky (PF). (31.05.16) Policy and Banking 12. On Amending Certain Laws of Ukraine (regarding the organization of the 4032а Members of Ukrainian Parliament: Not available Not available Under consideration by the FSR is retained. National activities of the Cabinet of Ministers of Ukraine, central executive authorities, S.O. Taruta (IND); Committee on Legal Policy Commissions will be other state authorities and business entities authorized by government with the 19.07.2016 O.V. Kirsh (PF); and Justice subordinated to the aim to bring them in compliance with the current Constitution of Ukraine)41 V.V. Chumak (IND); Parliament. L.P. Kozachenko (PPB). 13. On Amending Article 16 of the Law of Ukraine on Development and State 5249 Members of Ukrainian Parliament: Not available Not available Under consideration by the Support of Small and Medium-Sized Businesses in Ukraine (regarding the S.P. Labazyuk (PP); Committee on Industrial implementation of preferential lending to small and medium-sized businesses)42 07.10.2016 Ye.Yu. Rybchinsky (PP); Policy and Entrepreneurship I.F. Molotok (PP);

A.L. Derkach (IND); S.Ya. Rudyk (PPB); Ya.M. Moskalenko (PP); I.I. Melnichuk (PPB). 14. On Financial Leasing43 6395 Members of Ukrainian Parliament: Not available Not available Under consideration by the M.V. Dovbenko (PPB); Committee on Financial 19.04.2017 R.Ye. Demchak (PPB); Policy and Banking M.A. Poliakov (PF);

V.V. Galasiyuk (RPOL);

and other Members of Parliament from PPB, RPOL, Self-Help and PP 15. On Credit Unions44 6405 Members of Ukrainian Parliament: Not available Not available Under consideration by the S.V. Rybalka (RPOL); Committee on Financial 21.04.2017 M.V. Dovbenko (PPB); Policy and Banking R.Ye. Demchak (PPB);

and other Members of Parliament from PPB, Self-Help, PF and IND

16. On Special Features and Bans on Practicing Professional Collector Activities45 6417-2 Members of Ukrainian Parliament: Not available Not available Under consideration by the O.Yu. Vilkul (OB); Committee on Legal Policy 17.05.2017 D.V. Kolesnikov (OB); and Justice K.Yu. Pavlov (OB); A.V. Galchenko (OB).

40 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=58848 41 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=59825 42 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=60224 43 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61655 44 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61680 45 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61806

Opinion of the Bill No. and Relevant Central # Bill name Introduction Sponsor committee Progress Comments Scientific and Date (dd.mm.) action Expert Office 17. Resolution on the Ukrainian Pension System Upgrading 6509 Members of Ukrainian Parliament: Not available Not available Under consideration by the Concept N.Yu. Korolevska (OB); Committee on Social Policy, Ukrainian Pension System Upgrading Concept46 25.05.2017 Yu.V. Solod (OB). Employment and Pensions 18. Draft Resolution Recommending to Conduct Parliamentary Hearings on the 6664 Members of Ukrainian Parliament: Not available Not available Committee on Social Policy, Priority of Complying with Insurance Framework in Pension Reform L.L. Denisova (PF). Employment and Pensions 30.06.2017 19. On Amending Certain Laws of Ukraine Regarding Mandatory Liability Insurance 4642-д Members of Ukrainian Parliament: Not available Not available Committee on Financial of the Carrier for Damage to Life and Health of Passengers and Third Persons47 Ya.V. Dubnevych (PPB); Policy and Banking 07.06.2017 V.M. Ostapchuk (RP);

I.A. Didenko (Self-Help); Yu.B. Kozyr (PPB); O.I. Urbansky (PPB). 20. On Amending Article 133 of the Tax Code of Ukraine (Regarding the Inclusion 6534 Members of Ukrainian Parliament: Not available Not available Under consideration by the of Pension Funds in the Register of Nonprofit Institutions and Organizations)48 A.S. Yevlakhov (PPB); Committee on Tax and

01.06.2017 P.O. Rizanenko (PPB); Customs Policy M.A. Poliakov (PF). 21. On Amending Article 133, item 133.4, sub-item 133.4.1 of the Tax Code of 6534-1 Cabinet of Ministers of Ukraine Not available Not available Under consideration by the Ukraine Regarding the Inclusion of Pension Funds in the Register of Nonprofit Committee on Tax and Institutions and Organizations49 15.06.2017 Customs Policy

Parliament Fractions Accronyms: PPB Petro Poroshenko Block; PF – Popular Front; OB Opposition Block; RPOL Radical Party of Oleg Liashko; PP Power of the People; RP Rennaisance Party; IND Independent

46 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61895 47 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=4642&skl=9 48 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=6534&skl=9 49 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62039

Annex 4 Performance Indicator List and Tracking Table (PILTT)

Unit of Measure and Frequency of Baseline

Source Collection

FY17 Target FY17 Actual FY18 Target FY18 Actual FY19 Target FY19 Actual FY20 Target FY20 Actual Project Purpose: Create a financial sector that supports businesses of all sizes with products which serve a wide range of business needs 84% Credit to private sector as % of total Unit of Measure: % 0.1 as of N/A N/A N/A N/A Annual credit (context indicator) Source: NBU 01.01.2017 Definition: This indicator expresses the value of financial resources provided to the private sector by the banking system of Ukraine. Justification: Indicates changes in the financial support of production, consumption, and capital formation affecting economic activity in the country. Disaggregated by: N/A European Business Association (EBA) Unit of Measure: Score 2,85 3,15 0.2 Investment Attractiveness Index from 1 to 5 (best) 2nd half N/A 1st half N/A N/A N/A Annual (context indicator) Source: EBA 2016 2017 Definition: This context indicator is the Index developed by the European Business Association which measures the confidence of businesses operating in Ukraine (1-3 negative value; 3-4 neutral value; 4-5 positive value)

Justification: Measures the level of satisfaction with the current investment climate in Ukraine Disaggregated by: N/A 84,8% Ratio of foreign currency deposits to Unit of Measure: % 0.3 as of N/A N/A N/A N/A Annual all deposits (context indicator) Source: NBU 01.01.2017 Definition: This context indicator is a proportion of FCD to all deposits in the banking system of Ukraine. Justification: Allows to understand the level of confidence in the local currency of Ukraine and the level of currency substitution. Disaggregated by: N/A Cross-Component Indicators Unit of Measure: Number Person hours of training on financial Source: Implementing 25,344 0.4 empowerment completed supported partners; reports, activity 0 39,060 as of June 2,000 1,600 1,360 Quarterly by USG assistance reporting 30, 2017

Definition: This indicator measures the number of USG-supported training hours, that were completed by training participants and is calculated by using the following equation - number of persons trained multiplied by the number of hours in the training curricula. Indicator is cumulative for each reporting period. A person should meet training completion criteria in order to be counted. Training is considered a project provided if it is conducted by the project directly, is directly sponsored by the project, or implemented under

MOU by partners engaged by the project. Justification: A measure of intensity of trainings provided by the project on financial understanding and awareness. Disaggregated by: Project sub-component, sex, topic, region of Ukraine, international, local; category of participants

Unit of Measure and Frequency of Baseline

Source Collection

FY17 Target FY17 Actual FY18 Target FY18 Actual FY19 Target FY19 Actual FY20 Target FY20 Actual Unit of Measure: Number 354 Number of media placements Source: Implementing 0.5 0 250 as of June 300 50 350 Quarterly produced with USG assistance partners’ reports, activity 30, 2017 reporting Definition: Number of media placements (audio, video, text messages) produced by the project in a given time period. Each airing/printing of the same message is counted separately

Justification: A measure of intensity of project media campaigns Disaggregated by: Project-subcomponent, type of media, region of Ukraine Sub - Component A: Increased Public Confidence in, Understanding, and Use of Financial System Unit of Measure: Score Financial consumer rights compliance from 1 to 5 (best) A6 with relevant EU directives and Source: Implementing 0 1 3 1 Annual international standards partners’ reports, activity reporting Definition: This indicator measures changes in financial consumer rights protection, which leads to increased public confidence and use of financial system in Ukraine. Assigns score to current state of legislation that implements European Union directives and international standards (higher score means better compliance of the legislation)

Justification: A measure of progress towards compliance of financial consumer rights protection with EU standards and international standards. Disaggregated by: N/A Unit of Measure: score Index of financial literacy and A7 Source: public opinion 0,51 0 0,53 0 0,56 Bi-annual awareness survey Definition: This is a direct measure of public understanding of the financial system and financial services offered by the financial institutions in Ukraine Justification: A measure of progress towards increasing confidence and use of the financial system of Ukraine by public Disaggregated by: N/A Unit of Measure: score TBD Level of use of financial services A8 Source: public opinion (~June TBD TBD TBD TBD Bi-annual

survey 2017) Definition: This is a direct measure of public use of financial system and services offered by the financial institutions in Ukraine. Justification: A measure of progress towards increasing the use of financial system in Ukraine by public Disaggregated by: N/A Unit of Measure: Score 1-7 3,4 3,1 Trustworthiness and confidence in (best) WEF WEF A9 financial system index (context N/A N/A N/A N/A Annual Source: WEF Global Report Report indicator) Competitiveness Index 2015 2016-2017 Definition: This context indicator is a part of the indexes under pillar 8 of the World Economic Forum Global Competitiveness index Justification: Allows to receive independent measure of business confidence in financial system from an internationally trusted source Disaggregated by: N/A

Unit of Measure and Frequency of Baseline

Source Collection

FY17 Target FY17 Actual FY18 Target FY18 Actual FY19 Target FY19 Actual FY20 Target FY20 Actual Sub - Component B: Transformed Non-Banking Financial Sector Regulatory Environment Unit of Measure: Score Improvements in the securities and (see scorecard from 1 to B10 0 1 2 1 1 Annual capital markets legislation 5) Source: Activity reporting Definition: This is a direct indicator of a transition to a more effective regulation of securities and capital markets and of better compliance of this regulation with international practices. This change allows to achieve higher investor confidence and protection thus better servicing the needs of Ukrainian citizens and enterprises in raising the capital.

Justification: This is direct measure of the securities and capital markets regulatory environment change Disaggregated by: N/A Number of new products introduced Unit of Measure: # of new or contracts developed in capital and products introduced or B11 0 1 2 1 1 Annual commodity markets with the contracts developed assistance of FST Source: Activity reporting Definition: This is a direct indicator of financial products introduced and contracts developed with the USG assistance. Justification: This is direct measure of results which happened due to the securities and the capital markets regulatory environment change Disaggregated by: N/A Unit of Measure: Score Ukraine’s compliance with IOSCO from 1 to 9 B12 0 0 3 3 3 Annual principles Source: NSSMC reports, activity reporting Definition: This indicator is a direct measure of change introduced to the laws, rules and regulations, which enable compliance of the National Securities and Stock Market Commission with IOSCO principles in the area of inspection, investigation, and enforcement and allow the NSSMC to use these powers to assist its foreign counterparts. The indicator is based on a scorecard and assigns score to each change introduced, that implements IOSCO principles. Total possible points - 9 Justification: A measure of progress towards transformation of the non-bank financial sector regulatory environment Disaggregated by: N/A Unit of Measure: Score (Score card from 1 to 9) Operational and IT functions B13 Source: Technical Leads 0 5 4 0 0 Annual improvements in NSSMC and implementing partners’ reports Definition: This indicator measures the operational and IT functions improvements of NSSMC. The indicator assigns a score to improvements in the area of the NSSMC’s IT system, strengthening of information security process and infrastructure modernization. Justification: This is a measure of improved efficiency of NSSMC, which is a major partner in the legislative work directed to transformation non-banking financial sector regulatory environment. Disaggregated by: N/A

Unit of Measure and Frequency of Baseline

Source Collection

FY17 Target FY17 Actual FY18 Target FY18 Actual FY19 Target FY19 Actual FY20 Target FY20 Actual Sub - Component C: Increased Access to Finance for SMEs Unit of Measure: % Source: International Monetary Fund, 57% Domestic credit to private sector as C14 International Financial as of 59% 61% 63% 65% Annual % of GDP (standard indicator) Statistics and data files, 01.01.2017 World Bank and OECD GDP estimates Definition: This standard indicator 4.3-1, which refers to financial resources, provided to the private sector by financial corporations, such as through loans, purchases of non- equity securities, and trade unions and other accounts receivable, that establish a claim for repayment. The financial corporations include monetary authorities and deposit money banks, as well as other financial corporations such as finance and leasing companies, moneylenders, insurance companies, pension funds, and foreign exchange companies.

Justification: Allows understanding changes in the financial sector and seeing whether it increases financing of production, consumption, and capital formation, which in turn affect economic activity. Disaggregated by: N/A Number of leasing contracts 7,401 1,569 concluded during the reporting Unit of Measure: Number as of as of C15 8,500 9,700 11,200 12,800 Quarterly period Source: Regulator, surveys October March 31, 31, 2016 2017 Definition: This is a direct indicator of increased access to finance for SMBs as a result of USG assistance expressed by a number of leasing contracts concluded within the reporting period.

Justification: Indicator of development of leasing market and improved capacity of leasing companies to finance private sector of Ukraine including SMEs. Disaggregated by: N/A 288 75,74 Unit of Measure: Millions Value of leasing contracts concluded as of as of C16 of US dollars 330 380 435 500 Quarterly during the reporting period. October March 31, Source: Regulator, surveys 31, 2016 2017 Definition: This is a direct indicator of increased access to finance for SMBs as a result of USG assistance expressed by value of leasing contracts concluded with the reporting period.

Justification: Indicator of development of the leasing market and improved capacity of leasing companies to finance private sector of Ukraine including SMEs. Disaggregated by: N/A Unit of Measure: Score NBFI Legal and Regulatory from 1 to 5 C17 0 0 2 2 1 Annual Environment Reform Source: Verkhovna Rada reports, activity reporting Definition: This indicator is a direct measure of NBFI legal and regulatory reform, which enable environment for the NBFI market development including increased access to finance for SMEs. Total possible points are 5. Justification: A measure of progress towards NBFI legal and regulatory reform.

Unit of Measure and Frequency of Baseline

Source Collection

FY17 Target FY17 Actual FY18 Target FY18 Actual FY19 Target FY19 Actual FY20 Target FY20 Actual Disaggregated by: N/A Sub - Component D: Increased financial inclusion and expanded digital finance solutions Share of digital payments using Unit of Measure: Percent 31,2% D18 33% 35% 38% 40% Annual payment cards Source: NBU as of 2015 Definition: Percent of cashless transactions by volume. The indicator of a share of cashless payments out of the total amount of operations conducted with the help of payment cards.

Justification: Indicator of expanded cashless economy Disaggregated by: N/A 10% as of Percent of individuals using digital Unit of Measure: Percent D19 4th quarter 12% 14,5% 16,5% 19% Annual financial services Source: individual survey 2016 Definition: Estimated percent of adult population of Ukraine reporting using digital financial services. Justification: A measure of Increased access to and usage of digital finance solutions Disaggregated by: Region of Ukraine, sex, age group, at risk population group Level of cash payments in the Unit of Measure: Percent 14,6% D20 N/A N/A N/A N/A Annual economy (context indicator) Source: NBU as of 2015 Definition: This is a context indicator - ratio of cash in circulation (M0) to GDP Justification: Measure of the amount of cash transactions in the economy that should grow in introduction of digital financial services Disaggregated by: N/A Unit of Measure: Score Improvements in the Digital Finance from 1 to 4 (best) D21 0 1 1 1 1 Annual Legislation Source: Verkhovna Rada, activity reporting Definition: This indicator measures improvements in the digital finance legislation leading to better financial inclusion of population and expanded use of digital financial services. Justification: Improved legislative environment boosts increased financial inclusion of population and expanded use of digital financial services. Disaggregated by: N/A Sub - Component E: Balanced and Sustainable Pension System Unit of Measure: Score (Score card from 1 to 5) Material improvements in the Pension E22 Source: Technical Leads 0 5 0 0 0 Annual Fund efficiency and implementing partners’ reports Definition: This is the indicator of the extent, to which the Pension Fund is able to maintain a balanced and sustainable pension system. Specifically, it demonstrates (1) to what extent the Pension Fund has modernized ICT facilities, which enable it to reduce administrative costs and provide improved services; (2) developed and started implementing action plan to improve financial sustainability of the pension system. The indicator assigns a score to improvements in the area of the Pension Fund IT system, infrastructure

modernization, development of a roadmap and implementation of the information campaign on the pension system. Justification: A direct measure of progress towards effective pension system Disaggregated by: N/A

Unit of Measure and Frequency of Baseline

Source Collection

FY17 Target FY17 Actual FY18 Target FY18 Actual FY19 Target FY19 Actual FY20 Target FY20 Actual Unit of Measure: Percent 11,2% Pension expenditures ratio to GDP Source: Ministry of Finance as of E23 N/A N/A N/A N/A Annual (context indicator) of Ukraine, Pension Fund December of Ukraine 2016 Definition: This is context indicator - percent of total pension fund expenditures to GDP Justification: A measure of success of reforms of the pension system; can be used to understand effectiveness of the pension system Disaggregated by: N/A Unit of Measure: Score Improvements in the pension system from 1 to 4 (best) E24 0 1 3 0 0 Annual legislation Source: Verkhovna Rada, activity reporting Definition: This indicator measures progress in pension related legislation towards more sustainable and balanced pension system Justification: A measure of the pension system improvements. Disaggregated by: N/A