Attacks on ports threaten business loans: what the NBU is ready to change
Restrictions on maritime logistics are already worsening the cash flows of Ukrainian companies and their ability to repay loans. The National Bank has urged banks to restructure the debts of viable businesses and is prepared to temporarily ease certain credit-risk assessment rules.
Systematic Russian attacks on energy, logistics, warehouse and port infrastructure are creating additional risks not only for exports but also for banks that lend to Ukrainian businesses.
This was stated by National Bank of Ukraine Governor Andriy Pyshnyy. According to him, restrictions on maritime transportation have had a particularly severe impact on companies in the real economy that depend on exports.
Delays or temporary suspensions of overseas deliveries mean that companies receive export revenue later. Finished goods accumulate in warehouses, prices and demand change, and production and logistics chains are disrupted.
As a result, companies find it increasingly difficult to make loan payments on time and obtain new financing. This creates a risk of deterioration in the quality of banks’ corporate loan portfolios.
At the same time, the NBU has not announced an immediate threat to the stability of the banking system and has not named any specific financial institutions that could be at risk. The regulator is instead seeking to limit potential credit losses in advance.
Pyshnyy stressed that timely support for borrowers could prevent temporary logistics problems from turning into a prolonged financial crisis for businesses.
What the NBU recommends to banks
The regulator has sent banks a letter containing recommendations on how to support companies affected by the deteriorating security situation and logistics disruptions.
Financial institutions have been advised to assess each borrower individually and, where necessary, use debt restructuring, revised repayment schedules and other support measures.
This may include postponing individual payments, extending the loan term or agreeing on a new debt-servicing schedule. The specific terms will depend on the company’s financial condition and the bank’s internal policies.
At the same time, Pyshnyy warned banks against using formal restructuring to rescue borrowers that are no longer viable. Restructuring should not be used to conceal insolvency or disguise a problem loan.
Banks have also been advised to continuously monitor companies’ financial condition, taking into account logistics restrictions, changes in demand and prices, the loss of production links and other wartime factors.
Special conditions for agricultural companies
The NBU has paid particular attention to the agricultural sector. Agricultural companies are especially dependent on the operation of ports because a significant share of their output is intended for export.
Banks have been urged to ensure uninterrupted financing for the sector, particularly for the sowing campaign and other critical production processes.
When assessing agricultural borrowers, banks are advised to consider the entire production cycle and not automatically downgrade their credit standing because of temporary logistics problems or seasonal fluctuations in financial indicators.
Financial institutions will also be able to make greater use of companies’ finished products as collateral. This mechanism is important when goods physically exist but their sale is delayed because of export restrictions.
What rules the National Bank plans to change
The NBU is preparing temporary changes to credit-risk regulation. In certain cases, banks will be allowed not to apply some default indicators to legal entities that require short-term restructuring.
The relief will be available only when there are grounds to believe that the company remains viable and will be able to resume debt servicing after overcoming temporary difficulties.
The regulator also plans to expand the use of agricultural products in circulation or processing as collateral. To achieve this, it intends to increase the liquidity coefficient applied to such assets.
The proposed changes are expected to remain in force for one year after their introduction. The final parameters will be set out in NBU regulations.
What this means for the banking system
Exporters’ problems may gradually spread to banks through an increase in overdue payments and the need to create additional provisions for problem loans.
The more such loans appear in a bank’s portfolio, the more capital it must allocate to cover potential losses. This may restrict its ability to issue new loans even to financially sound companies.
However, Pyshnyy’s statement does not mean that individual banks are already facing critical difficulties. The NBU has not published estimates of potential losses by institution and has not linked the risks exclusively to state-owned banks.
The main purpose of the proposed measures is to preserve financing for viable businesses, prevent a sharp increase in arrears and, at the same time, stop banks from concealing the real quality of their loan portfolios.
For Ukrainian companies, the decision will have practical significance if banks begin approving restructuring requests more quickly and take into account the temporary nature of problems caused by attacks and export restrictions.
Based on materials from: Andriy Pyshnyy, Interfax-Ukraine, Financial Club
