President of Ukraine Volodymyr Zelenskyy held a meeting on the identification of priority steps for the revival of bank lending as one of the preconditions for speedup of economic growth of Ukraine.
The meeting was attended by Prime Minister Oleksiy Honcharuk, NBU Governor Yakiv Smolii, Minister of Finance Oksana Markarova, Minister of Justice Denys Malyuska, Minister of Internal Affairs 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.
The President stressed that the loan portfolio volume to business unfortunately did not show any significant growth. This means that the business does not have the resources to expand its activity, and the Ukrainian economy is left without “fuel”. Therefore, the common task of the authorities is to drop barriers to the restoring lending and to solve the problems of non-performing loans to the banking system began to work properly.
“Ukraine had to spend a huge amount of money, almost UAH 300 billion to protect depositors and maintain the stability of the financial system. Besides we have over 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 work on its solution,” Prime Minister Oleksiy Honcharuk noted.
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 justice 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, improved the banking sector after the crisis and 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 took 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.
He noted 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,” the NBU Governor emphasized.
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 implementation 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.
According to the President, banks need to be protected from the risk of non-repayment of funds by borrowers and the execution of judgment should be strictly enforce. “Therefore, judicial reform also remains one of the key prerequisites for revival of bank lending,” the Head of State said.