On February 11, 2015, Governor of the National Bank of Ukraine Valeriia Gontareva delivered a speech at the plenary meeting of the Verkhovna Rada of Ukraine.
The speech was focused on the Draft Law of Ukraine On Amendments to the Law of Ukraine On Moratorium on Foreclosure of Ukrainian Citizens' Property Provided as Collateral for Foreign Currency Loans with regard to enhancing the protection of creditors' rights, which was earlier passed by the Verkhovna Rada of Ukraine and vetoed by the President of Ukraine.
According to Valeriia Gontareva, the rationale for President's decision to veto this Draft Law is that instead of offering a comprehensive solution to the problem related to the settlement of obligations under loans denominated in foreign exchange, the Law virtually deprives creditors of the right to satisfy their legal claims on debtor's property pledged as collateral.
The imposed moratorium is an inadmissible interference with economic activities, which poses significant insolvency threats to banks and deprives them of the possibility of meeting their obligations to depositors.
“This approach is unacceptable, as it only defers the solution of problems faced by foreign exchange borrowers for an indefinite period of time, which means leaving them alone to fight debt burden rising at a fast pace," concluded Governor of the National Bank of Ukraine Valeriia Gontareva
The National Bank of Ukraine believes that efforts by the government authorities should be channeled toward finding a comprehensive solution to the problem encountered by foreign exchange borrowers, which was caused by the imposition of such a moratorium, rather than trying to streamline the mechanism for its implementation, which can result in extending this restriction for an unlimited term.
According to the Governor of the National Bank of Ukraine, the regulator, in line with agreements with the International Monetary Fund, gives its backing to a voluntary dialogue between the borrowers and banking institutions over the conversion and restructuring of foreign exchange loans.
The long-standing process of reconciling positions between the National Bank of Ukraine and banks with a large portfolio of mortgage loans denominated in foreign exchange resulted in a new Memorandum on restructuring consumer loans put forward by the banking community (hereinafter – Memorandum).
Active participants in a dialogue maintained as part of the Memorandum are banks in which mortgage loans denominated in foreign exchange account for 90% of the total amount of loans held in the portfolio. The Memorandum has already been signed by 12 banks.
The banks have voluntarily agreed to assume a portion of losses stemming from the depreciation of the hryvnia exchange rate that occurred in 2014. The direct losses alone incurred by banks as a result of forgiveness of a portion of restructured loan will amount to approximately UAH 15 billion, or 40% of the total amount of loans subject to restructuring under the Memorandum.
The enactment of the Memorandum is conditional on making amendments to the Tax Code of Ukraine. Therefore, the regulator calls for amendments to Tax Code of Ukraine.
As a side note, the members of the Ukrainian Parliament have failed to override the veto of the President of Ukraine. Presently, the Draft Law of Ukraine On Moratorium on Foreclosure of Ukrainian Citizens' Property Provided as Collateral for Foreign Currency Loans with regard to enhancing the protection of creditors' rights has been sent to be finalized.