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RESOLUTION OF BOARD OF THE NATIONAL BANK OF UKRAINE

of July 18, 2019 No. 97

About approval of the Regulations on the organization of process of management of troubled assets in banks of Ukraine

(as amended on 17-04-2020)

According to Articles 7, 15 and 56 Laws of Ukraine "About the National Bank of Ukraine", to articles 44 and 66   of the Law of Ukraine "About banks and banking activity", for the purpose of increase in effective management of banks of Ukraine of troubled assets the Board of the National Bank of Ukraine DECIDES:

1. Approve Regulations on the organization of process of management of troubled assets in banks of Ukraine (further - the Provision) which are applied.

2. To banks of Ukraine:

1) to bring the activities into accord with requirements of the Provision according to the schedule which is attached;

2) within 15 calendar days after the term of accomplishment of the next stage established in graphics to provide to the National Bank of Ukraine information on accomplishment.

3. To department of methodology (Natalya Ivanenko) after official publication to inform banks information on adoption of this resolution.

4. To impose control over the implementation of this resolution on the First Deputy Chairman of the National Bank of Ukraine Ekaterina Rozhkova.

5. The resolution becomes effective from the date of, its official publication following behind day.

Chairman

Ya. Smoly

Appendix

to the Resolution of Board of the National Bank of Ukraine of July 18, 2019 No. 97

The schedule of introduction by banks of Ukraine of requirements of the Regulations on the organization of process of management of troubled assets in banks of Ukraine

No. of payment order

Implementation stages

Accomplishment term

1

2

3

1

Plan development of work with the dormant assets and the withheld property recognized by bank as of March 01, 2020

Till April 30, 2020

2

Development/completion and implementation of system of early reaction

Till May 31, 2020

3

Reduction of organizational structure of bank in compliance to requirements of the Provision

Till June 30, 2020

4

Development/completion and implementation of processes of management of dormant assets and the withheld property

Till August 31, 2020

5

Development and approval of strategy of management of troubled assets and operating plan

Till September 30, 2020

6

Development, approval and implementation of procedure for control and reporting under accomplishment of strategy of management of troubled assets

Till September 30, 2020

7

Introduction of requirements for information systems of bank

Till November 30, 2020

Director of the department of methodology

N. Ivanenko

Approved by the Resolution of Board of the National Bank of Ukraine of July 18, 2019 No. 97

Regulations on the organization of process of management of troubled assets in banks of Ukraine

I. General provisions

1. This Provision is developed according to the Laws of Ukraine "About the National Bank of Ukraine", "About banks and banking activity" and is aimed at providing effective management of banks of Ukraine with troubled assets, reducing level and amount of such assets in banks and bank system of Ukraine.

2. This Provision establishes the minimum requirements to banks of Ukraine (further - bank) on the organization of process of management of troubled assets.

3. The approaches determined by this Provision are based on the Guidelines for banks of rather idle credits of the European Central Bank published on March 20, 2017, Installations of the European banking supervisor authority on management of the unemployed and the re-structured expositions (on October EBA/GL/2018/06, 31, 2018).

4. In this Provision terms and reducings are used in such value:

1) active banking activity (further - asset) - the term is used in the value determined in Regulations on the determination by banks of Ukraine of the extent of credit risk on active banking activities approved by the resolution of Board of the National Bank of Ukraine of June 30, 2016 No. 351 (with changes) (further - No. Provision 351);

2) the auditor - auditing firm which is included in the Section of the Register of auditors and subjects of auditor activities which is kept according to the Law of Ukraine "About financial records audit and auditor activities" concerning subjects of auditor activities which have the right to book statutory audit of the financial reporting of the companies which are of public interest, and with which bank according to requirements of the Regulations on procedure for submission by bank to the National Bank of Ukraine of the audit report by results of annual verification of the financial reporting approved by the resolution of Board of the National Bank of Ukraine of August 2, 2018 No. 90 (with changes) signed the agreement on rendering auditor services;

3) the outsourcer - the term is used in the value determined in the Regulations on the organization of risk management system in banks of Ukraine and banking groups approved by the resolution of Board of the National Bank of Ukraine of June 11, 2018 No. 64 (with changes) (further - No. Provision 64);

4) outsourcing - the term is used in the value determined in the Provision No. 64 ;

5) debt on asset - the term is used in the value determined in the Provision No. 351 ;

6) the responsible person for work with dormant assets - the authorized person of bank which provides accomplishment of the functions on management of dormant assets determined by this Provision;

7) settlement of debt - determination and implementation by bank of the measures directed to reducing level and amount of potentially troubled and dormant assets by application by bank separately or in combination of instruments of settlement including:

instruments of financial debt restructuring of the debtor / partner;

instruments of operational restructuring of assets of the debtor/partner;

extrajudicial settlement of debt, including voluntary repayment by the debtor/partner of debt, voluntary realization of pledged property, financial leasing;

sale debt/concession of right to claim against the debtor/partner;

converting (translation) of part or all outstanding amount of the debtor/partner before bank in the capital of the debtor/partner (the share, share in the authorized capital);

recovery by enforcement of debt of the debtor/partner through legal procedures, including settlement of debt judicially, during enforcement proceeding, in insolvency proceeding, other enforcement powers of settlement;

acquisition in property of bank of the pledged and other property of the debtor/partner, the property guarantor on account of debt repayment of the debtor/partner;

write-offs / partial write-off of the depreciated financial assets at the expense of provisions under the expected credit losses (further - debt write-off) according to the legislation of Ukraine, regulatory legal acts of the National Bank of Ukraine (further - National Bank) and international accounting standards;

8) the group of the connected partners - is used in the value determined in the Instruction about procedure for regulation of activities of banks in Ukraine approved by the resolution of Board of the National Bank of Ukraine of August 28, 2001 No. 368, registered in the Ministry of Justice of Ukraine on September 26, 2001 for No. 841/6032 (with changes);

9) group of legal entities under general control (further - group under general control) - the term is used in the value determined in the Provision No. 351 ;

10) debt of the debtor/partner - the amount unexecuted the debtor/partner for the corresponding date of monetary commitments before bank, including the amounts of the unpaid commissions, penalty fee, penalties;

11) class of the debtor/partner - the class of the debtor/partner determined by bank according to requirements of the Provision No. 351 ;

12) not operational assets of the debtor/partner - intangible assets, long-term, current and other financial investments, long-term receivables, goodwill, other current receivables;

13) dormant assets - it is used in the value determined in the Provision No. 351 ;

14) division on work with dormant assets - one or several structural divisions of bank providing accomplishment of the functions on management of dormant assets determined by this Provision;

15) Chart of accounts - The chart of accounts of financial accounting of banks of Ukraine approved by the resolution of Board of the National Bank of Ukraine of September 11, 2017 No. 89 (with changes);

16) potentially troubled assets - the assets having the signs of potential problematical character determined by this Provision and assets being the unemployed based on subitems 1, of 8, of 17, of 19, of 20, of 21 Item 165 and the subitem 10 of Item 166 of the Section XVIII of the Provision No. 351, if the bank based on judgment proved that there is no need to take measures of settlement of debt of the debtor/partner by division for work with idle assets / the responsible person on work with dormant assets (further - division of the NPA);

17) troubled assets - the total volume of potentially troubled assets, dormant assets, the collected property;

18) the procedure of financial restructuring - the term is used in the value determined in the Provision No. 351 ;

19) restructuring - the term is used in the value determined in the Provision No. 351 ;

20) system of early reaction - set of procedures and instruments of early identification of potentially troubled assets and adequate response to the revealed signs of potential problematical character of the debtor/partner;

21) the collected property - property which carried over bank based on realization of the rights of the pawnbroker in accordance with the terms of the agreement of pledge/mortgage or otherwise according to the legislation of Ukraine on account of debt repayment of the debtor/partner, except property which is used by bank for own needs and ensuring technological implementation of bank functions;

22) judgment of bank - the documented reasoned decision of managerial personnel / collegiate organ which is based on:

the complex and objective analysis of all information influencing justification, realness and efficiency of the measures taken by bank during management of troubled assets;

own experience of bank which is based on the reliable, continuous, complete and complete statistical data which are available for bank (further - own experience of bank);

23) financial receivables - are used in the value determined in the Provision No. 351 .

5. The bank during reflection in financial accounting of the transactions connected with troubled assets according to requirements of this provision provides observance of requirements of regulatory legal acts of National Bank for financial accounting.

II. General approaches and principles of the organization of process of management of troubled assets

6. The bank will organize process of management of troubled assets with respect for the following principles:

1) economic feasibility;

2) priority;

3) timeliness;

4) structure;

5) adequacy;

6) comprehensiveness and complexity;

7) efficiency;

8) monitoring.

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