The National Bank of Ukraine expresses concerns about the lack of support in parliament of legislative initiatives aimed at the protection of creditor rights. MPs have rejected Draft Law No. 4529 On Amendments to Some Laws of Ukraine (regarding stimulation of lending in Ukraine).
The NBU stresses that this is the second time that parlament has not approved a draft law on creditor rights protection. However, it is strategically important that the financial sector reforms be moved forward. Creditor rights protection which would enable banks to resume lending is provided for by the Comprehensive Program of Financial Market Development of Ukraine until 2020.
At the same time, the NBU hopes that parliament and the Ukrainian financial community will be able to reach a compromise and establish a legislative framework to ensure effective creditor rights protection.
Draft Law No.4529 rejected by parliament has laid down the basis for significantly reducing banks' exposure to risks while performing lending operations. Thus, this draft law, inter alia, is intended to:
- reduce debtors and creditors’ expenses associated with debt settlement by improving out-of-court mechanisms;
- prevent the evasion from fulfilling credit obligations when in case of inheritance or recognition of heritage as escheat to the creditor of the deceased;
- mitigate banks' exposure to risks of losing mortgage property in cases of unauthorized construction;
- clearly define the terms and conditions for the termination of a suretyship agreement;
- reduce the financial burden on borrowers of banking institutions;
- align the banking legislation with the Civil Code of Ukraine in terms of the rules about the order of succession rights;
- repeal a requirement to notarize a collateral agreement under which a vehicle is pledged as collateral;
- prevent a foreclosure of vehicles that have been pledged as collateral without a bank without the consent of the pledge holder; and
- put in place mechanisms allowing banks to access information on borrowers retrieved from the State register of acts of civil status of citizens.
In addition, Draft Law No. 4529 is intended to harmonize the domestic legislation with the international standards, stimulate lending to the real sector and reduce borrowing costs.