Parliament approves in the first reading a bill on European mechanisms for lending to individuals and businesses

The Verkhovna Rada adopted Bill No. 15172, “On Securitization and Covered Bonds,” as a basis. The document is intended to bring the Ukrainian financial market closer to EU standards and create conditions under which banks will be capable of attracting significantly more funds for long-term lending to individuals and businesses.

The main goal of the changes is to allow banks to convert existing long-term loans (such as mortgages) into liquid securities. Instead of waiting 10–20 years for borrowers to repay their debts, a bank will have the option to raise funds from investors using these loans as collateral and immediately use the proceeds to issue new loans.

“The adoption of this law creates the market conditions for a systematic reduction in the cost of credit for citizens and businesses. We are introducing new long-term investment products and bringing Ukrainian legislation in line with EU standards. This will allow banks to obtain funds from investors at a lower discount, which will ultimately stimulate competition and lower the cost of loans, including mortgages,” said Yegor Perelygin, Deputy Minister of Economy, Environment, and Agriculture of Ukraine.

What specific systemic changes the bill provides for:

- Introduction of new securities: Modern instruments—securitization bonds and covered bonds—are being introduced. They will allow for the infusion of “long-term” capital into the economy, particularly from private pension funds and foreign investors.

- Creation of specialized financing platforms: These are new intermediary companies (special-purpose vehicles, or SPVs) that will purchase pools of loans from banks and issue securities backed by those loans. This mechanism ensures the transparency of the process.

- Dual level of investor protection: An individual or company that purchases the new bonds will have the right to demand payment both from the issuing bank itself and from the collateral (the coverage pool).

- Immunity from bank bankruptcy: If a financial institution becomes insolvent, investors’ funds and collateralized assets will not be included in the bank’s general liquidation estate; that is, they cannot be seized to repay other debts.

- Introduction of independent oversight: The market will gain new infrastructure participants. Among them will be “independent coverage pool monitors,” who will continuously oversee the condition of the collateral, and “special administrators,” who will take over loan management in the event of a bank closure.

- Adoption of the EU quality standard (Simple, Transparent, and Standardized—STS). To confirm that securities are simple, transparent, and standardized (as is the case in Europe), special authorized verification agents will be in place. The National Securities and Stock Market Commission will oversee the entire market.

- Legislative updates: The bill comprehensively amends more than 15 existing laws (on banks, capital markets, the depository system, etc.) and repeals the outdated Law “On Mortgage Bonds.” To fully complete the reform, separate draft amendments to the Tax and Civil Codes will be submitted.

In effect, the bill creates a mechanism for the multiple use of bank capital, which allows for a significant increase in the economy’s lending potential without a proportional expansion of banks’ resource base. The law does not merely introduce new instruments; it transforms bank credit from a “one-time” asset into one that can repeatedly provide new financing for the economy.

Implementing these innovations does not require additional expenditures from Ukraine’s State Budget.