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Ukrainian Parliament passes bill on lending resumption

More than 55% of the banks’ loan portfolio is made up of bad loans.
12:42, 19 May 2018

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Ukraine’s parliament, the Verkhovna Rada passed bill #6027-d in a repeated first reading. The bill concerns the resumption of lending and is expected to solve the issues of low financial discipline of borrowers, Interfax-Ukraine reports.

The bill gained the support oof 237 members of parliament, while the required minimum is 226.

 

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“Full resumption of lending is being blocked by a number of legal loopholes, which harms the effectiveness of the banking sector”, - the head of the National Bank of Ukraine Yakiv Smoliy at the parliamentary meeting on Thursday. Among the loopholes, he pointed out an ineffective bail system and widespread schemes of subtrscting from contractual obligations under the bail agreement through liquidating the debtor business, the complex and risky mechanism for determining the change in the interest rate, the ineffective mechanism for non-litigated settlement of debt obligations.

More than 55% of the banks’ loan portfolio is made up of bad loans. This means that these loans are not serviced for over 90 days, the interest is not offset, the body of the loan is not paid back. This is why banks see their money mass shrink, harming the debtors. Those debtors, that account for more than a half, look for any possible loopholes in the legislature in order to get away from the responsibility for not performing on the obligations to a bank” – the first deputy head of the parliamentary committee on financial policy and banking activity Mykhaylo Dovbenko said while presenting the bill in the parliament.

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According to the explanatory note attached to the bill and published on the parliament’s website, a procedure regarding the banks’ access to the State registry of public assets. It is suggested that such access would be granted upon written consent of the individual linked to the data.

Moreover, the term for creditors’ demands to descendents is cut from 1 year to 6 months. Nonetheless, this norm excludes a situation where a bank did not and counld not know of the descendency opening.

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