The National Bank of Ukraine (NBU) has approved a set of anti-crisis measures to support banks and the economy, when tougher restrictive measures are introduced, including a stricter quarantine regime (from 8 to 24 January 2021).
"Considering the spread of the epidemic, the regulator has decided to continue series of anti-crisis measures and introduce new ones to support the banking sector and the economy. On the one hand, the NBU’s efforts will reduce regulatory burden on banks, and on the other hand, will assist the economy and borrowers that suffer the most from stricter quarantine measures," noted Kyrylo Shevchenko, Governor of the National Bank of Ukraine.
1. Banks are recommended to restructure loans of borrowers facing financial difficulties from introduced restrictive measures and are unable to repay their loans. Banks are permitted to apply some default triggers to loans that will be restructured:
- until 30 April 2021 (inclusively) for retail borrowers
- until 31 May 2021 (inclusively) for corporate borrowers.
On the one hand, restructuring should mitigate the impact of the crisis on the financial standing of borrowers, and on the other hand prevent risks of banks’ capital loss. Restructuring should neither impair conditions for borrowers nor increase the effective interest rate. Banks should not set commission for restructuring.
Restructuring is recommended to be done remotely. To become eligible for restructuring corporate borrowers should confirm reduction of income or cessation of operation. Banks apply to medium and big businesses individual restructuring approach considering financial statements and business recovery prospects, to individuals – portfolio-based assessment (save for mortgages and car loans).
Also banks will be permitted:
- not to downgrade the class of borrowers considering information from the Credit register until 29 April 2021
- not to revaluate or check the condition of pledge until 30 March 2021
- to omit during assessment of budget-funded entities the performance indicators of budgets 2020 and 2021 until 4 January 2023.
2. Restructuring debts of green energy producers. Banks are permitted not to apply some default triggers, if restructurings take place until 30 April 2021 (before 28 February).
3. Managing problem assets. Banks are authorized to define and set by the troubled assets management strategy a target level of NPLs for 2021 considering expected economic implications of the quarantine and restrictions in the short run.
4. Drawing up and submitting business recovery plans. Banks are permitted:
- stress testing using only one stress-testing scenario foreseeing a prolonged negative economic effect of the pandemic
- submit a business recovery plan in test mode before 1 March 2021
- not to include into business recovery plans a list of critical functions.
5. Approving candidates for bank top management positions. The NBU will continue distant testing procedure of top managers and candidates for top management positions as an interview with candidates by means of videoconference.
6. Submitting documents to the NBU. Banks and nonbank financial institutions are permitted to submit documents by e-mail with affixed qualified electronic signature.
Respective measures were approved by NBU Board Resolution No. 160 dated 21 December 2020 that takes effect on 22 December 2020.The mentioned Resolution shall supplement measures previously introduced by the NBU to support the banking system for the restriction period associated with the spread of COVID-19.
- Imposing corrective measures. Until June 2021, no penalties on banks and banking groups will be imposed for their failure to comply with indicators for capital, liquidity, credit risk, and so on.
- Such decision will only cover violations as a result of adverse effects of quarantine, provided that a bank or banking group complies with capital adequacy and liquidity ratios under Articles 75 and 76 of the Law On Banks and Banking. The decision shall not apply to banks that distributed profits for 2019 by paying out dividends.
- Capital buffers. In March 2020, the introduction was postponed due to the developing coronavirus crisis. Gradually the NBU will settle on the realization schedule for these buffers and release a prior notice on the website.
- Inspections. Conducting all types of onsite inspections will be suspended till the last day of the month, when the quarantine is lifted.
- LCR. The NBU has postponed for two year the introduction of provision on considering in the structure of high-quality liquid assets in foreign currency not more then 80% of correspondent account balances in foreign banks with the rating beyond the investment grade.
- Managing noncore assets. Banks were given more time to clean-up the balance sheet from assets not used for banking. These are mainly residential and commercial real estate that banks recognize on the balance sheet for foreclosing collateral.