A step forward: what will the easing of the ban on converting foreign currency loans into hryvnia change for business

Ukrainian business always finds ways to adapt to challenges, even in the most difficult times. The total ban on the conversion of foreign currency loans into hryvnia creates additional difficulties for entrepreneurs, but they can be simplified by allowing banks and businesses to independently agree on the feasibility of such an operation, UNN writes.

Given the difficult economic situation in Ukraine, allowing banks and businesses to individually decide on the conversion of foreign currency loans into hryvnia could be an important step towards improving the relationship between banks and their clients. Such an approach would allow banks to respond more flexibly to the needs of their clients, which would ultimately improve their financial performance and reduce the risk of loan default.

Economic experts also emphasized this in their comments to UNN.

"Given the fact that the economic situation is very difficult for most business entities in Ukraine, it would be worth at least easing (the NBU's ban on restructuring foreign currency loans - ed.). Because if, for example, a client makes an agreement with a bank, and the bank is ready to meet the client, for example, a regular client, or one with whom it has been working for a long time and has a good credit history, then why not allow it to be done to at least slightly ease the financial situation of the business entity," Andriy Novak, Chairman of the Committee of Economists of Ukraine, said in a commentary to UNN.

Economic expert Oleksandr Parashchiy is confident that banks in Ukraine are self-sufficient and do not need additional protection from their customers. He emphasizes that by allowing banks and clients to negotiate the conversion of loans into hryvnia, the NBU will facilitate business development, which is critical for the country's economy. This will increase confidence in the banking sector and create a favorable business climate.

At the same time, lawyers point out that this ban contradicts the principle of freedom of contract.

"The said mandatory prohibition cannot be circumvented, even if both parties to the loan agreement agree to it. This restriction of the NBU has a negative impact on economic activity," says Nazariy Adamchuk, attorney at law and partner at Alekseev, Boyarchukov and Partners.

It is worth noting that this resolution banning the conversion of foreign currency loans was introduced by the previous head of the NBU, Kyrylo Shevchenko, at the beginning of the full-scale invasion. However, the current head of the regulator, Andriy Pyshnyi, has the opportunity to change the situation, because, as experts note, there is currently nothing preventing the NBU from mitigating it.

In addition, easing the ban on the conversion of foreign currency loans will have positive consequences for Ukraine's economy and will promote business development, which is the basis of the country's economic stability. By allowing banks and clients to decide on conversion issues individually, the NBU will be able to create more flexible conditions for entrepreneurs, which in turn will lead to increased economic activity and GDP growth.

"Such changes are very appropriate and will help ensure economic stability and budget revenues necessary to support the country," emphasized MP Lyudmyla Buymister, a member of the Verkhovna Rada's Economic Committee, in a commentary to UNN.

One of the Ukrainian businesses that has a foreign currency loan that dates back to 2006 is the owners of the Gulliver shopping center in Kyiv. By the way, at the time of the loan, the company that received the loan had other owners. The crises of 2008 and 2014 dealt an irreparable blow to businesses that were lent in foreign currency. This led to the fact that the current owners of Gulliver were forced to restructure their debt in 2020. However, it was not possible to convert the loan into hryvnia.

So, perhaps the time for change has come, and the NBU will soon revise its policy on the conversion of foreign currency loans into hryvnia. By allowing banks and clients to decide on this issue individually, the NBU will create favorable conditions for business, reduce the risk of loan defaults and strengthen confidence in the banking sector. This is an important step towards stabilizing Ukraine's economy and supporting entrepreneurs in difficult times.