New financial restructuring procedure to be launched in Ukraine on April 3
The administrative secretariat that would manage the financial restructuring system and be responsible for processing individual restructuring cases will start working on April 3, a member of the supervisory board for financial restructuring Olha Bilay said at a press conference in Kyiv on Thursday.
She said that starting this day borrowers can submit applications for restructuring. Next day after receiving the applications the secretariat is to check if the documents meet some provisions of the law on financial restructuring and is to decide on launching the restructuring procedure. On the same day the secretariat is to publish the relevant information on its website.
"I know that there are borrowers interested [in the launch of financial restructuring]. One cannot say that there are many of them. Most of them want to wait a month or two and see how the procedure will pass. Nevertheless, now, during the first month the secretariat would have a lot of work," she said.
According to a press release of the European Bank for Reconstruction and Development (EBRD), the financial and logistical support for the operations of the secretariat is provided by the Independent Association of Banks of Ukraine (NABU) and the EBRD. The framework and implementing institutions are governed by a supervisory board which will include representatives of the National Bank of Ukraine, the Ministry of Justice of Ukraine, the Ministry of Economic Development and Trade of Ukraine as well as the state-owned banks Oschadbank and Ukrgasbank.
Along with the secretariat, an arbitration committee will manage any disputes between parties through the appointment of an independent and qualified arbitrator selected from an officially approved list.
"The framework, introduced by the Law on Financial Restructuring in late 2016, is designed to improve the portfolios of financial institutions by making them more sustainable and competitive. It is also expected to contribute to the quality of customer relations between banks and corporate borrowers," the bank said in the press release.
"This truly revolutionary procedure is designed to address the issue of NPLs [non-performing loans] in Ukraine, which rank among the highest in Europe. It provides a much-needed out-of-court loan restructuring mechanism for market participants and will help to preserve jobs as well as restore viable businesses," Francis Malige, EBRD Managing Director for Eastern Europe and the Caucasus, said.
Head of NABU Council Roman Shpek said that at present over 26% of loans are NPLs, amounting to over UAH 270 billion.
"We do not think that this procedure would be a cure-all solution, but we would like that one third of the total NPL portfolio used it," he said.
The procedure is voluntary. The framework agreement regulating the rules and principles of cooperation of the sides during negotiations does not contain any liabilities on the conditions of restructuring of concrete borrowers.
Bilay said that at present three banks have joined the framework agreement: two state-run banks and the Individuals Deposit Guarantee Fund, and one financial institution.