NBU Publishes Recommendations for State-Owned Banks on Restructuring Non-Performing Loans
The Financial Stability Council (FSC) has approved the Recommendations for the State-Owned Banks on Treating Nonperforming Loans (NPLs) (the Recommendations) at its last meeting as of 20 December 2018.
These recommendations approved and published by the FSC are foreseen by the Memorandum between Ukraine and the IMF and should help mitigate one of the systemic risks to the financial stability of Ukraine as regards the excessive volume of nonperforming loans in the banking system.
The Recommendations have been developed in addition to requirements of the Law of Ukraine On Financial Restructuring by a working group established by the FSC and composed of representatives of the NBU, the Ministry of Finance, and the Deposit Guarantee Fund. They concern the restructuring of only large loans, that is, loans that exceed 5% of the regulatory capital of banks, and establish the basic preconditions to be complied with to ensure the fairness and transparency of the restructuring process, as well as the protection of interests of the state as an ultimate owner of banks.
The Recommendations are not legally binding, however, the FSC reserves the right to request an explanation from a state-owned bank in case it fails to follow the recommendations. The state-owned banks will report semi-annually to the FSC on their progress in restructuring NPLs. The first report is scheduled for February 2019.
The Recommendations shall take effect on 9 January 2019 and remain in effect up until the effective date of the NBU regulation on the NPL management in banks, which is being developed jointly with the World Bank.
Although these recommendations are meant for the state-owned banks, the privately-owned banks can use them as well.
Please find the document at the NBU website in the section Financial Stability – Financial Stability Council.