Today, on October 7, the National Bank of Ukraine hosted a joint press conference by Deputy Governor of the National Bank of Ukraine Vladyslav Rashkovan and Deputy Minister of Finance Artem Shevalyov, at which the draft Law of Ukraine On Financial Restructuring elaborated by the Ministry of Finance jointly with the National Bank of Ukraine drawing on best international practices was presented.
The Ministry of Finance and the National Bank are involved in active efforts to restore the health of public finances and stabilize the banking sector with the aim of recovering the economic growth of Ukraine. To this end, both the Ministry and the National Bank are taking decisive measures to tackle the structural economic and financial problems.
Thus, the Ministry of Finance and the National Bank jointly elaborated a legal mechanism for the financial restructuring of loans extended to legal entities. The draft Law of Ukraine On Financial Restructuring is intended to recover economic activity of enterprises and revive bank lending, thus setting the stage for sustainable economic growth of Ukraine.
According to Deputy Minister of Finance Artem Shevalyov, companies, banks, citizens and the entire economy will benefit from the proposed law. “This draft law is intended to solve the problem of the legacy of a substantial amount of non-performing loans and prevent the risk of bankruptcy of companies currently experiencing liquidity shortage which still can get back to normal, if we assist them addressing the problem of “bad” loans. The approach we apply in this draft law would enable companies to avoid bankruptcy and regain solvency, thus saving existing and creating new working places for Ukrainian citizens”, Mr. Shevalyov said. So far Ukraine has not had any special legislation on the restructuring procedure applied to loans extended to legal entities. Financial institutions have been trying to negotiate with debtors, but they are not always successful in this.
The draft law will also contribute to strengthening the banking system and restoring trust in it. According to Deputy Governor of the National Bank Vladyslav Rashkovan, financial restructuring will help banks reduce the amount of nonperforming loans, thus enabling them to channel the funds released into lending to the growth-oriented economy.
“The economic crisis caused a steep deterioration of the financial standing of many companies in Ukraine. Bad debts are rising and affecting the banking capital. We are sure that civilized, not cosmetical, restructuring steps for viable companies would give security both to banks and to debtors. The proposed draft law offers effective security measures to prevent loan problems in the future and must enter into force along with the package of legislation on the protection of creditors’ rights. This package was developed by the National Bank and banking community and submitted to the Parliament,”said V. Rashkovan .
The draft law has been developed drawing upon best international practices based on the «London approach» described in the financial restructuring regulations of the Bank of England. These practices have so far been successfully applied in Turkey, South Korea, Thailand, Serbia and a number of other countries.
The procedure of financial restructuring is voluntary, not binding for all companies. It will be implemented based on agreements with all parties and under conditions acceptable for each party.
After a public discussion and approval by the Cabinet of Ministers the draft law will be submitted to the Parliament for consideration.