President Volodymyr Zelenskyy held a meeting aimed at identifying priority steps to revitalize bank lending as one of the preconditions for accelerating the growth of the Ukrainian economy. The meeting was attended by Prime Minister Oleksiy Honcharuk, NBU Chairman Yakiv Smolii, Finance Minister Oksana Markarova, Minister of Justice Denys Maliuska, Interior Minister Arsen Avakov, representatives of the Deposit Guarantee Fund of individuals, state-owned banks and the banking community. Law enforcement officials also participated in the discussion.
“Unfortunately, the volumes of loan portfolios for businesses do not show any significant growth. This means that the business does not have the resources to expand its activity, the economy of Ukraine is left without fuel. Our common task is to remove the obstacles to resuming lending and to solve the problems of non-performing loans to ensure the banking system starts working properly”, the President assures.
“Ukraine had to spend a huge amount of money - almost UAH 300 billion to protect depositors and maintain the stability of the financial system. Plus we have more than UAH 500 billion of sub-prime loans. In particular, more than UAH 400 billion in state-owned banks. This is money lost by ordinary people just because one of the debtors had refused to fulfill his obligations and had not returned the money. We know about this problem and are working to solve that", Prime Minister Oleksiy Honcharuk commented on the situation.
In order to return taxpayers' funds, maintain financial stability, and resume active lending, the state should work actively to collect debt from borrowers and ex-owners.
“This is a matter of coordinated activity of the Prosecutor General's Office of Ukraine, the National Bank, the Government and the judicial system. It is important for the debtors to know that either they voluntarily repay the funds, or the State will use all the tools for their return”, Oleksiy Honcharuk added.
According to NBU Governor Yakiv Smolii, the National Bank, having improved the banking sector after the crisis, has laid the foundation for its proper work, but many problems are still relevant, and the main one is non-performing loans. “Ukraine is the world leader on this indicator. Today, the volume of problem loans in Ukrainian banks is about 50%, or UAH 566 billion. This is one of the systemic risks for our financial system. If the debtors had taken responsibility for repayment, the banks would be able to disband reserves formed in case of non-repayment of loans and direct this resource for lending to a real business”, Yakiv Smolii said and added that the situation with PrivatBank is the most difficult because the whole portfolio of non-performing loans were loans to former owners. “The State is trying to repay these funds through the courts of different jurisdictions: in Ukraine, the United Kingdom, the United States and Switzerland”, emphasized Yakiv Smolii.
According to the Prime Minister, the financial-economic bloc of the Government plans to concentrate efforts on clearing state banks from non-performing loans. First, through the restructuring of the obligations of borrowers that is currently operational. Second, through the disposal by banks of distressed assets, in particular through the use of Dutch auction mechanisms with the parallel development of the market of secondary financial assets. Third, by further upholding of interests of the State in the Courts of Ukraine and abroad for repayment of outstanding funds by former bank owners and related persons.
Minister of Finance Oksana Markarova stressed the importance of corporate governance in the public banking sector. “Our priority is working and effective supervisory boards of state-owned banks, without which implementation of the government-approved development program and a strategy for reforming the public banking sector are impossible. Solving the problem of non-performing loans and establishing active lending is the task of all branches of corporate governance of state-owned banks”, she said.
The unfinished judicial reform is another obstacle to the resumption of loan services.
“The courts are independent and the President can not interfere in their work on specific cases, but this does not mean that it is necessary to work on the quality of the judicial system as a whole”, Volodymyr Zelenskyy stressed. “Banks need to be protected from the risk of non-repayment of funds by borrowers and the execution of judgment should be strictly enforced. Therefore, judicial reform also remains one of the key prerequisites for revival of bank lending”.