Page 102 - Azerbaijan State University of Economics

CONTRIBUTION OF BANKING SYSTEM INTO FINANCIAL STABILITY OF UKRAINE

10.4bln or 10,7% of total loans, while corporations contributed USD 7.5bln and

individuals – USD 2.9bln. Under IFC estimations, level of NPLs in Ukraine is
expected to amount USD 40.0bln or 42% of total volume of loans (Transfer of

bad assets in Ukraine, IFC, 2012).

The differences between appraisals of NPLs volumes by NBU, IMF and
IFC are based on special approaches to estimations of overdue debt. IFC defines

loans as ones being overdue if occur circumstances under which bank may have
doubt regarding loan repayment. IMF classifies loans as bad loans in case interest

and principal amount of debt are overdue for 90 days or more and there are other
evidence that loan will not be serviced duly.

Today growth of NPLs in banking system has suspended. Partially this is due

to banks’ proactive attitude in implementation of bad assets management policy. The
most widely spread instruments for bad assets management among Ukrainian banks

are self-maintained management of overdue loans, transfer of bad loans to collectors

on conditions of agency agreement, sale of loans portfolios to collectors and factoring
companies, including ones connected with seller. Most banks use combinations of

instruments: on early stages they employ self-maintained management and use
outsourcing on later stages of bad loans management. Regarding last time –

tendencies for portfolio sale prevails.
Among latest instruments we would like to emphasize reassignment of

individuals’ loans to other individuals, bank’s involvement into business of

borrower, transfer of bad loans to mutual fund, repayment of loans of
perspective companies by other companies in lieu of share in business (if so

agreed).
As was noticed earlier, special incentives, being implemented into legislation and,

particularly, banking legislation, also may facilitate arrangement of agent’s and principal’s
interests.

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