Mopping up banking sector in Ukraine: the value for society and state


Authors examine the world experience of work with insolvent banks. The mechanism of liquidation as the most common procedure of working with insolvent banks in Ukrainian practice is determined. The shortcomings of Ukrainian legislation in the context of the evidence for bank classifications as insolvent and failing are defined. The main grounds of denying Deposit Guarantee Fund (DGF’s) claims and the cancellation of NBU’s decisions on referring banks to the insolvent ones are found out. The main causes of bad debts growth, which resulted in the losses of the banking system, are outlined. The assessment of banks scales, which have been taken off the market in 2014–2017, is presented. It is noted that the process of “mopping up” the banking sector led to a sharp increase in the financial burden on DGF, which, in turn, was forced to borrow in the government.

The analysis of insolvent banks’ assets is presented. Facts of biased evaluation of property rights claims under credit agreements and assets evaluation, that reflects the hopeless of bank’s money return, are established. The growth of state debt of Ukraine due to devaluation of the national currency and the issue of internal bonds, tax gaps as consequences of “mopping up” the banking sector is revealed.

The ways of negative impact minimization of “mopping up” Ukrainian banking sector by adequate NBU’s execution of supervision and controlling functions, increase in transparency and efficiency of DGF’s and State Financial Monitoring Service of Ukraine’s activities, improvement of a legal mechanism of banks’ investors and creditors protection are proved.

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