Ukrainian banks have switched to European approaches to assessing "problem loans". What has changed?
Kyiv • UNN
From January 2025, Ukrainian banks will use European approaches to assessing non-performing loans. The innovations have brought the definition of NPL closer to the European level, but the share of NPL has increased by 0.2%.
Approaches to banks' definition of problem loans changed from January 2025. Since then, the share of non-performing loans (NPL) has increased by only 0.2%, - reports the NBU, writes UNN.
Key factor in NPL growth
The only reason for the increase in NPL in January is the effect of the introduction of new approaches by banks
According to the updated requirements for non-performing assets, the bank owns default assets that have been recognized as such in accordance with prudential requirements.
Reference
Prudential supervision in the capital and organized commodity markets ensures the transparency and controllability of the activities of professional market participants.
New approaches to the definition of non-performing assets
Only certain categories of default assets may not be recognized as "non-performing" based on the bank's judgment:
- acquired or created impaired financial assets in accordance with International Financial Reporting Standards;
- restructured loans, if after they were recognized as non-performing, the bank carried out a repeated restructuring;
- and/or for which there is an overdue debt repayment of more than 30 days.
Previously, only defaulted assets were considered "non-performing loans".
The innovations helped the Ukrainian financial sector to become more transparent and bring the definition of NPL closer to the European one
Let us remind
UNN reported that the share of problem loans in banks has decreased, but has not yet reached the pre-war level.
