Grace period, restructuring and debt prolongation: Ukrainian banks help debtors restore solvency
Kyiv • UNN
Ukrainian banks are using out-of-court restructurings and debt prolongation with a grace period to support clients with credit difficulties. These measures helped to reduce NPLs by UAH 4.2 billion over six months.
In order to support customers in a situation of difficulties with loans, Ukrainian banks use out-of-court restructuring, as well as possible debt prolongation with a grace period for interest payments. This was reported by the press service and the NBU's TG channel, according to UNN.
Details
Since the beginning of the full-scale Russian invasion, the number of non-performing loans has increased, but Ukrainian banks are introducing tools to help restore customers' solvency.
Out-of-court restructurings are the most common tools used by banks to deal with NPLs. They are designed to mitigate the debt burden on the client and enable him to restore his solvency.
Banks have restructured about half of all corporate NPLs that remain on their balance sheets today.
Until February 24, 2022, the most common concession to NPL clients was a debt extension. However, it was only rarely granted with a grace period for paying interest on the loan.
Since the beginning of the full-scale war, banks have become more flexible, the NBU reports.
To leave more resources for the client to restore their financial situation more quickly, several instruments were combined at the same time. In 62% of cases, it was a combination of loan prolongation and grace period for interest payment
It should be noted that banks still do not cut rates very often, with the exception of restructurings conducted in accordance with the Law on Financial Restructuring, which were mostly conducted before 2022, the report adds.
In resolving NPLs, the final “last resort” tool is the collection and sale of collateral by the bank.
At the same time, “military” NPLs are better secured.
Due to comprehensive measures taken by banks, the volume of NPLs decreased by UAH 4.2 billion to UAH 418.2 billion in the first six months of this year, according to financial experts.
