OREANDA-NEWS. The National Bank of Ukraine welcomes Parliament’s adoption of Draft Law No. 3555 Financial Restructuring as a basis. A total of 229 MPs voted in favor of this bill. 

“The developed legal mechanism for restructuring of nonperforming loans will help accelerate the recovery of the financial and corporate sectors. It is a voluntary and out-of-court solution mechanism, which   provides a platform for negotiations between banks and borrowers. Therefore, creditors will have a well-defined procedure for establishing a club to handle problem debtors and cooperate with other creditors. The club will function on a collegiate basis,” said NBU Deputy Governor, Mr Vladyslav Rashkovan.

According to Mr Rashkovan, this draft law is a structural benchmark set by the IMF program and one of the objectives set out in the Comprehensive Program of Financial Market Development of Ukraine until 2020.

Financial restructuring of debts will address the legacy of a substantial amount of non-performing loans and the risks of going bankrupt and terminating business operations faced by potentially viable  enterprises due to temporary liquidity problems   and enable these enterprises to return to sound financial performance. This draft law will enable banks to reduce the amount of nonperforming loans and channel the released funds toward resuming lending and boosting the economy. Furthermore, financial restructuring of debts will   enable companies to avert the risk of bankruptcy and give them a breathing space to return to solvency, thus allowing Ukrainian citizens to keep their jobs and creating more jobs in the economy.

The   financial restructuring procedure provides for the following:    

?           the extension of maturity terms

?           the revision of interest rates and loan agreement terms and conditions

?           debt rollover

?           forgiveness of  part of the debt

?           investment injections into the debtor’s capital

?           the reorganization of debtor's business

?           the replacement of a chief executive officer and/or  Executive Board Members of the debtor

?           the reshaping of the debtor’s corporate governance structure

Draft Law No. 3555 is intended to establish a reliable and effective legislative framework for informal workouts of bad debt to settle disputes between creditors enterprises.  The financial restructuring procedure  provides for voluntary rather than obligatory participation of all companies. Debts shall be restructured based on terms agreed by all parties involved. 

This draft law was developed by the NBU and the Ministry of Finance of Ukraine with assistance from the European Bank for Reconstruction and Developments.  The draft law was submitted to the Cabinet of Ministers of Ukraine for approval and registered in parliament on 30 November 2015.

Twenty-six draft laws required for advancing financial sector reforms are pending approval by parliament.  These include strategically important draft laws pertaining to the protection of creditors and financial services consumers' rights, financial restructuring of corporate debts, consolidation of the state regulation of financial services markets functions, as well as anti-money laundering draft laws.