Simplified restructuring of debts owed to banks during quarantine
On 21 December 2020, the National Bank of Ukraine (hereinafter referred to as the NBU) adopted Resolution No. 160 “On Approval of the Rules of Operation of Banks of Ukraine in Connection with Quarantine and Introduction of Restrictive Anti-Epidemic Measures to Prevent the Spread of Coronavirus Disease COVID-19 and Amendments to Certain Regulatory Acts of the National Bank of Ukraine”.
The resolution generally aims to support the banking industry, but also recommends a number of actions by banks to restructure customer debts, in particular:
– restructure loans for borrowers who have financial difficulties from the introduction of restrictive measures and are unable to service their loans;
– require proof of a significant temporary reduction in income or work stoppage;
– determine the terms and duration of loan restructuring, taking into account the financial condition of the borrowers, the economic aspects of their activities, including the vulnerability of their financial condition due to deteriorating economic conditions;
– determine the terms of the restructuring, which must not worsen the conditions for the borrower, in particular leading to an increase in the effective interest rate;
– avoid imposing explicit or implicit charges for restructuring necessitated by quarantine;
– inform the clients about the possibility of loan restructuring, specifying the conditions for restructuring;
– restructure the loans of medium and large businesses on a case-by-case basis and taking into account the borrowers’ latest financial statements, current financial condition and vulnerability to deterioration in the economic situation, as well as the realistic prospects for restoring their ability to service the restructured loans on time and in full.
Banks are allowed not to extend individual indications of default to loans to be restructured:
– until 30 April 2021 (inclusive) for individual debtors;
– until 31 May 2021 (inclusive) – for corporate debtors.
– not to downgrade a borrower based on information from the credit register – until 29 April 2021;
– not to reassess and check the condition of pledged assets – until 30 March 2021.