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Incident NPL in Ukraine (google auto-translate)

In Ukraine the indicator of bad loans in the total portfolio of banks for several years held the record for European and global banks level. Given the fact that in fact, new lending to the corporate sector is chronically critical level, that is, "depositing" the portfolio of new loans is not happening. Therefore, when compared to the NPL in Ukraine with other countries, if we normalize the data on the portfolio of loans issued before 2014 will be generally unacceptable picture. For the sake of the recovery of the banking system and the resumption of lending, particularly strategically important enterprises, most of which are clients of public banks, has implemented a project on introduction in action of the law of Ukraine "On financial restructuring".

Рівень проблемної заборгованості в світі

Today, the law is actually valid for more than 6 months, counting from the date of opening of the Secretariat and the beginning of acceptance of applications for restructuring. According to open data on the web, anyone can verify that we now have eight treatments, four of which have already been successfully completed. 70% of procedures the size of the portfolio belong to PJSC "Oschadbank of Ukraine". By the way, the total restructured portfolio of cases reached 5 billion hryvnias, despite a small total number of procedures is a significant amount and demonstrates the possibilities of the Law. But have that other state-owned banks and almost all commercial, have not opened any procedure. On the other hand there is the fact that the lack of activity of state and commercial banks regarding the procedure, does not mean the high quality of their loan portfolio. After analyzing public data published on the website of the NBU regarding the quality of the loan portfolio of all banks of Ukraine, we will see next, neopterin picture.


Moreover, with the deepening of the problematics of this question, it is easy to find the "open secret" of banking institutions of Ukraine. The fact that in most banks the official statements does not give the actual distribution of loan portfolio by profitable and non-profitable parts. Because, with different economically and strategically justified reasons, financial institutions in the artificial regime on a regular basis revise credit terms for some customers, leaving credits on them officially in the "normal" state, though de facto these cases relevant to the problem.

That is, in our opinion, indirectly, most financial institutions understand the value of not only formal performance, but also strategically important subject of their activities - citizens of Ukraine (and their companies). Developing this idea, we can come to the fact that owing to the gradual reduction of Ukraine's population decreases and a potential basis for crediting in Ukraine. And that is why the realities of Ukraine, the financial system needs to be revitalized first by negotiations and maximizing support for those enterprises who have the desire and the potency of the strategy continue its activities in the Ukrainian legal field. The strategic benefit of Ukraine – the restructuring and reformatting of the business and not in bankruptcy proceedings and sale of assets with a huge discount. This is clear to all involved in the production of the Law idea, unfortunately still can not find full understanding in the financial market of Ukraine. This situation needs to change.

In turn, the Secretariat is trying to hold regular talks and events to promote the ideas which are incorporated in the Law. We have compiled and systematized the answers of the bankers and business representatives a simple question "Why haven't you taken advantage of the Law of Ukraine "On financial restructuring". What's stopping you?".

Have the following answers regarding the shortcomings of the Law and procedures sorted by popularity:

Financial institutions (creditors)

Enterprises of Ukraine (debtor)

The law "On financial restructuring", which actually came into effect on 3 April 2017 - late. Most financial institutions have handled the problem portfolio and reached an agreement or began the procedure of legal prosecution of a debtor and the realization of its assets. Need to negotiate again, but under the Law, do not see the point.


The law does not specifically prohibit the possibility of other (metalocene before the procedure) creditors to initiate the bankruptcy procedure of the debtor (after the moratorium)


Voluntariness and substantial transparency of the procedure, combined with the lack of alternatives in the form of quick and efficient punishment of the debtor by attachment and realisation of all its assets to repay debt. The financial institution does not have substantial leverage to force the Debtor to go into the procedure.


Through the voluntary nature of the procedure of financial restructuring, it is impossible to force the creditor to participate in the procedure without his consent.

The independent expert(company) must be agreed with the Debtor. The expert report should a significant impact on the procedures in case of a negative opinion, the procedure can be suspended without the signing of the restructuring plan. That is, the financial institution is not able to personally monitor all stages of the procedure and "guarantee" the result.


Writing a report of the independent expert, which is a mandatory part of the procedure, very costly thing. Moreover requires extraordinary transparency and confidence between the debtor and the creditor.

In respect of the first and most popular version of the "delay" of the Law, we can offer the banks to take another look at its loan portfolio. In a system where the official average NPL is 53% among TOP10 banks in terms of loan portfolio, and later can only be, if nothing is done.

The relative abundance of the transparency of the process and the involvement of the independent expert. Perhaps these nuances of the Law and can be subject to discussion and changes. But the publicity in practice is that the Secretariat website provides information regarding what the debtor so-and-so and so-and-so, the financial institution decided to launch a restructuring procedure that can not be interpreted as excess publicity. No other data of the terms and conditions of the restructuring plan, the size of the debt, details of creditors and stuff is not public information and, of course, no where not published.

The independent expert is indeed expensive part. However, if the company needs restructuring, it means that they plan to continue doing business. In these conditions, a comprehensive audit of all the international norms, with the conclusion about the prospects of your business is a strategic positive. The only limiting factor may be the amount of remuneration of the independent expert, but that is why the Law provides a list of some specific individuals who can be an independent expert. That is, each company can choose the market anyone who is satisfied with her including financially.

In the end, I want to add that the practical and systematic work procedures of financial restructuring, today is actively conducted only in PJSC "State savings Bank of Ukraine". Thanks to the Law of this Bank for the restructured bad loans worth more than 3 billion UAH, while there is a queue of cases for presentation in 2017-2018. Also in the fall of 2017 before the procedure joined and the system of commercial Bank PJSC "Alfa-Bank", which also represents the increase of the level value of the procedure in the Ukrainian market. That is, the positive effect of the Law is possible not only theoretically, but also quite practical. The only significant factor that stands in the way of mass popularity of the procedure, in our opinion, is the inertia of the business, both on the part of debtors and creditors (which is quite normal). And the global lack of tradition to act of mediation(voluntary and transparent). But in terms of population decline and long-term banking crisis we have the right to remain in a comfortable environment and to act within the framework of tactical interests.

A strong strategy is to maximize the restructuring and reformatting of the business to continue their activities, not the destruction of their activities.

Andrew Borovik
The Deputy Head Of The Secretariat
acting on the implementation of the Law of Ukraine "On financial restructuring"
The project is funded by a grant received from the European Bank for Reconstruction and Development under the Shareholder Special Fund.
The project is implemented by the administrative and financial support of NABU.