Ukraine to create single register of bank debtors

The creation of such a register is a condition for further cooperation of Ukraine with the International Monetary Fund (IMF) and the European Union for obtaining financing, DW reported.

According to a memorandum with the IMF, all banks, including those that were declared insolvent must file information on their debtors in the register as early as September. The system should be fully developed before the end of 2017.

The register will allow banks to see who of the potential borrowers already had problems with the repayment of previous debts, and thus assess the risks of their lending in the future.

"This is to avoid risks to banks when granting loans, as well as to adequately assess the credit risk on loans granted, which will contribute to improving the reliability of the banking system, strengthening the protection of the banks' depositors and other creditors," the National Bank of Ukraine (NBU) that will manage the register said.

Data on borrowers should include their financial condition, assets put up as collateral, and guarantors. The National Bank assured that Ukrainians could have access to information about themselves in the register and demand changes in case of disagreement with its content.

Read alsoNBU simplifies borrowing procedure for residentsCollecting information about borrowers is international practice. State credit registers exist in 16 EU countries, for example, in Austria, Bulgaria, the Czech Republic, Romania, Portugal. They are being created in six other countries now.

Ukraine is facing a major problem of bad debts today. According to the National Bank, over 55% of all the credits in the country are non-performing loans. The debt of enterprises and citizens to banks exceeds UAH 560 billion, or US$21.5 billion.

There were several reasons for such a large debt. "Ukraine's GDP contracted in 2014-2015, while the national currency devalued by about 67%. Thus, the money for fulfilling obligations before banks became much less, which is a natural consequence of the economic crisis, hostilities [in eastern Ukraine] and the loss of part of the country's territory," Chairman of state-run Oschadbank's board Andriy Pyshny said.

Financiers believe that the availability of a single list of debtors who do not fulfill their obligations will allow a solution to the issue of problem loans. "The availability of a single register will provide banks with access to more information about borrowers' servicing of loans, which will help make correct decisions when providing loans by banks," Director of Pivdennyi Bank's credit department Viktor Skoch said.

The bankers also suggest that information from the state register of bankruptcies and court decisions should be included in the said register in order to have more data on the solvency of potential customers.

By this time, there have been operating private credit history bureaus in Ukraine that collect information about debtors. However, they were not effective since they did not provide information about all borrowers and banks.

Read alsoNBU mulls measures to ease forex market regulationsThe National Bank said they have the right to receive information on credit transactions from banks. At the same time, legal experts specializing in banking law say that the law on the protection of personal data allows the banks to disclose the information to a third person about a borrower only with consent of the latter, or only in the interests of national security, economic welfare and the protection of human rights.

"Just indicating the NBU's right to receive information that constitutes bank secrecy from banks is not enough to form a register of borrowers, including under existing loan agreements. Thus, this issue requires a separate regulation under the law," Managing Partner of the Volhv law firm Oleksandr Navalnev said.

Ukraine's Justice Ministry earlier informed about causes when residential property should be seized for utilities debts.