9 January 2019
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.
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.
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.
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.
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.
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