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Settlement of NPL granted to individuals is impossible in existing legislative environment


‘Existing legal mechanisms for settlement of troubled debts have proved inapplicable; thus, there is a dire need to urgently elaborate and approve a certain law in this field as a compromise of interests of lenders, debtors and the state on the basis of redistribution of risks’, informed the Attorney at Law of Volkov Koziakov & Partners, Lesya Kovtun.
‘By reason of absence of the uniform register of credit histories which could contain data on troubled borrowers, escape from debt liabilities in particular by bankruptcy will continue to be a common practice for a long time in our country’, - she told in an interview to "Interfax-Ukraine".
Moreover, she added, one of the variants of NPL regulation is recognition of fictitiousness of individual-debtors’ bankruptcy. In this case the main fact for classification of fictitious bankruptcy is required: it is a personal written official legal statement of a borrower on his insolvency which should result in the court’s rendering of ruling on bankruptcy case initiation.
‘However, if a creditor applies to the court with the bankruptcy petition in relation to the borrower, the grounds for classification of fictitious bankruptcy are absent, despite the fact that in practice such scheme is often used,’ L.Kovtun told.
She explained that in accordance with the Methodical Recommendations of the State Tax Administration of Ukraine concerning investigation and detection of crimes, bankruptcy shall not be classified as fictitious in case where the lenders’ officials apply to the court with the bankruptcy petition in relation to the individual-entrepreneur as in this case the evidence on insolvency of the individual-borrower is presented by the creditor but not the borrower himself.
Pursuant to Article 218 of the Criminal Code of Ukraine initiation of bankruptcy cases (fictitious bankruptcy) shall be within powers of tax police authorities.
L.Kovtun also commented on the fact of submission by individuals of fictitious earnings certificate while obtaining a loan that, at the first sight, seems to be the solid ground to charge the latter with a fraud.
However, when presenting the fact of submission of fictitious earnings certificate while obtaining loans as the evidence of individuals’ fraud, creditors should mind that in practice in such circumstances it is not the borrower but officials of the enterprise who have issued such certificate are brought to responsibility for commission of administrative offence.
The Attorney believes that accusations of banks of their negligence when granting loans can also appear inconsistent as loan contracts of many banks contain a proviso that the borrower shall bear responsibility for integrity of delivered information. Also, in-house banking procedure sheets stipulate a detailed procedure of loans origination.
‘In the interpretation of the Criminal Code of Ukraine one could speak of banks’ error in assessment of economic risks in the period of a large-scale consumer lending rather than of bank officials’ negligence’, summarised L.Kovtun.
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