The National Bank of Ukraine urges the Verkhovna Rada of Ukraine to consider and approve Draft Law of Ukraine No. 4004 On Restructuring the Ukrainian Citizens’ Liabilities under FX Loans Extended for Purchasing the Single Residence (Mortgage Loans)  and approve it within the shortest time possible.

The Independent Association of Ukrainian Banks and the banking community with the support of the NBU have drafted this bill, being aware of social responsibility that rests on the banking sector and  in view of the massive public outcry at the issue of FX loans extended to individuals.

The draft law is intended to lower the financial load on individual borrowers who received FX loans for purchasing their single residence. Draft Law of Ukraine No. 4004 also provides for forgiveness of a part of the debt and a 3-year freezing of the interest rate on the rescheduled loan at the level of the initial interest rate on the FX loan granted. This move will enable FX borrowers to resume servicing their debt obligations and secure residence property for their families.

The Draft Law is socially oriented as it provides differentiated approach for identifying the share of debt subject to forgiveness considering the category of the borrowers and the property that was purchased with the borrowed funds.

The Draft Law introduces special terms of loan liabilities restructuring to those categories of citizens, to whom the state shall guarantee additional support, and also to the borrowers, who protect independence, sovereignty and territorial integrity of Ukraine by taking part in the anti-terrorist operation.

Thus, the Draft Law allows to change the currency of the liabilities at the NBU’s reference exchange rate as of the restrcturing date, with the following parts of the debt to be forgiven:

• to borrowers who have a single residence place - at least 25%;
• to borrowers who have a single low-cost housing (apartmets - up to 60 sq.m., houses -  up to 120 sq.m.) - at least 50%;
• to disabled persons of the 1st group, participants of the ATO, veterans, large families and families with a disabled child of the 1st group, who have a single residence place - at least 50%;
• to disabled persons of the 1st group, participants of the ATO, veterans, large families and families with a disabled child of the 1st group, who have a single residence place - at least 50%;
• to participants of the ATO, who received disability of the 1st group during the ATO and have the single residence place - at least 80%, who have a single low-cost housing - 100%;
• legitimate heirs of the ATO participants who died in the ATO - 100%.

Under this draft law, the following types of loans shall be restructured:

• loans taken out by borrowers to purchase a single residence meaning that borrowers have no other residential premises owned; 
• Thus, restructuring applies only to the loans with outstanding debt amounts up to UAH 2.5 million as of  1  January 2015 (i.e., amount to an equivalent of about USD 150 thousand).

Moreover, the draft law provides for the forgiveness of penalties having resulted from the borrower’s improper performance of their obligations starting from 1 January 2014.

At the same time, this draft allows banks to  make case-by-case decisions  and  restructure loans under more preferential terms and conditions (by using additional one or more financial instruments). Also, the draft law authorizes the banks to apply more favorable restructuring conditions upon their own decision and offer the borrowers their own restructuring programs approved by the banking institutions in cases when FX loans to individuals fail to meet the requirements of the Draft Law. 

The banking community believes that the suggested balanced approach to the problem of FX loans to individuals in Ukraine, on the one hand, will settle a conflict situation which is painful for the part of the Ukrainian citizens and which is used by various populist forces for undermining our country’s economic stability, and on the other hand, will save the banks from worsened or lacking solvency, since the Draft Law establishes severe restrictions as to the loans that may be restructured on favorable terms.