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IFC Helps Develop Non-performing Loan Market in Ukraine, Freeing Banks to Increase Lending


In Kiev:
Olena Harmash

Phone: +380 44 490 64 00

E-mail:
oharmash@ifc.org


Kiev, Ukraine, June 9, 2011—A new report sponsored by IFC, a member of the World Bank Group, finds that Ukraine’s problem loan market continues to be slow in developing, that local banks are still burdened with non-performing assets and are unable to focus on new lending.

IFC’s Financial Sector Crisis Response Program in Europe and Central Asia contracted Ukrainian rating agency Credit-Rating to review and analyze the potential of Ukraine’s non-performing loan market. According to the report, “Trends and Prospects of Ukraine’s Problem Loan Market,” banks only made sporadic sales of corporate non-performing loans. The report also estimated banks’ non-performing loans averaged at about 35 percent of their credit portfolio.


“We expect that overdue retail loans will be offered for sale in 2011, mortgage loan sales may also increase but the market on the whole will remain sluggish,” said Stanislav Dubko, CEO of Credit-Rating. “It is time for banks to change: to improve their risk management systems and review the way they work with non-performing loans.”


The report reveals that market players often lack a uniform valuation methodology to assess bad loans, banks are reluctant to sell, and investors often are unable to determine the underlying quality of the portfolios. The lack of an efficient market hinders investors’ ability to make informed decisions on the most viable structure to purchase and eventually manage distressed assets.  


IFC believes the report will help develop a consistent methodology for disposition of distressed assets, which in turn will give market participants unified approaches, and facilitate negotiations between banks and buyers of non-performing portfolios.

"This important report highlights the reasons a market for non-performing loans has been slow to develop in Ukraine," said Garth Bedford, Head of the Financial Market Crisis Response Program in Europe and Central Asia. "By providing objective information about constraints to the disposal of non-performing loans, the report encourages financial institutions to find solutions that will support the market's development and boost bank lending."

IFC’s Financial Sector Crisis Response Program in Europe and Central Asia was launched in 2009 in partnership with the governments of Austria, Finland, the Netherlands, and Switzerland. To disseminate good practice in risk management, the program has delivered training to more than 2,000 senior and middle-level banking professionals throughout the region. IFC experts also are working on legislative and regulatory aspects of creating a transparent and functional market for distressed assets to facilitate post-crisis recovery.


About IFC

IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in developing countries. We create opportunity for people to escape poverty and improve their lives. We do so by providing financing to help businesses employ more people and supply essential services, by mobilizing capital from others, and by delivering advisory services to ensure sustainable development. In a time of global economic uncertainty, our new investments climbed to a record $18 billion in fiscal 2010. For more information, visit
www.ifc.org.

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About Credit-Rating

For more information, visit
http://www.credit-rating.ua/