Creditors risk that more than half of the loans they issued will not be repaid

Photo: PHL

The credit portfolio of financial institutions decreased by UAH 34 bn to UAH 987 bn last month, the National Bank of Ukraine informed. In addition, the level of overdue payments since the start of the year continues to rise. According to the latest official data of the NBU, as of September 1 the debt was 11.2% compared to 7.7% at the start of the year.

Vicious circle

Experts assure that official statistics of the NBU do not reflect the real situation. “The volume of bad assets that are basically irretrievable is around 50%,” said former Governor of the NBU Serhiy Yaremenko. Bankers agree with this in private conversations.

The growth of overdue debts is due first and foremost to the worsening of the economic and political situation in the country, as well as the devaluation of the hryvnia. “The breach in financial flows is accompanied by mass bankruptcy of companies. In the current conditions, banks are also reducing the issue of loans. This further worsens the situation for borrowers that need a constant source of funds. As a result, the borrowers seize to repay the loans,” Yaremenko emphasized.

Banks complain about the insufficient protection of their rights as lenders. For example, the moratorium on the recovery of mortgage loans does not foster leveling the liquidity in the domestic financial system, Chairman of the Board of Delta Bank Olena Popova affirms. “When we made a decision to buy credit assets, the option of a moratorium was not considered. Now, on the background of all these hardships in the economy and the banking sector, we have another major issue to deal with,” says Popova.

According to her information, Delta Bank has more than 10,000 deals in the total amount of UAH 2.5 bn in the final stage of the inventory of property, appraisals and readiness for sale. “We prepared these claims over two to three years. This is what we were counting on when we drew up our liquidity plans. Unfortunately, this work was wiped out by one session of voting of members of parliament,” said Popova.

Covering loans through penalties for overdue debts of deadbeats is a long and expensive process, say Popova. She says the problem is that there are many state officials and deputies among major borrowers of loans. “Lobbyists are trying to influence the adoption of laws that will prohibit the recovery of loans or will complicate the process,” she added.

Senior Partner of the law firm Kravets and Partners Rostyslav Kravets says creditors are fully protected, while the moratorium on the confiscation of property from physical persons for non-payment of mortgages cannot have a significant impact on the banking system or be a reason for the insolvency of a bank.

In search of protection

Bankers say the protection of the right of creditors should be reinforced by legislation. “Otherwise, the banking system in our country will not be healthy and nobody will want to invest money to credit a country that does not protect the rights of creditors. No capital will be enough if the repayment or non-repayment of loans will depend only on the will of the debtor. Any banking system needs strict observation of the rules,” says Chairman of the Board of Ukrsotsbank (UniCredit Bank) Graziano Cameli.

Indeed, there are problems with the repayment of loans and lenders end up going bankrupt and even secured demands of the banks are not fulfilled due to machinations in the appraisal and sale of collateral property, partner of the Ilyashev and Partners law firm Maksym Koleichykov agrees.

“I hope the bill on the protection of the rights of creditors announced by the NBU will simplify the procedure of debt recovery,” he added. The NBU promises to submit the corresponding bill for review by people’s deputies in November.