Credit Dnipro Bank expert on the work of banks under quarantine and further lending plans

06 May 2020

Oleksandr Yaretsky, Head of Legal Department of Credit Dnipro Bank, spoke about the main topics, theses and conclusions of the LHS Discussion Hub legal conference "New Challenges for the Banking Sector", which took place recently and in which he participated as a speaker.

The banking sector, as an integral part of the economy, is forced to adapt to work in new crisis conditions that require adequate legal support and support. During the professional discussion, leading financial lawyers and regulators discussed current changes in legal requirements for financial institutions, new approaches to financial monitoring, changes in banks' relations with borrowers during quarantine, new challenges, prospects for overcoming the crisis and further development.

Particular attention was paid to the topic of banking credit strategies in the quarantine and post-quarantine periods. In general, the banking system should not expect a serious increase in the level of non-performing loans (NPLs) given the pre-crisis moderate lending to the economy, especially SMEs, as well as the lack of mass mortgages and car loans. Most banks will cope with the temporary slump in consumer lending due to a sufficient level of asset diversification, while the lack of panic among resource customers and the support of the NBU will allow financial institutions to avoid a liquidity crisis.

However, the negative impact of the crisis on the work of the sector is inevitable. Banks as credit intermediaries, ie those who borrow money from some, give it to others and earn on margins between interest rates, are too dependent on the state of the economy. Realizing that the economic downturn will negatively affect their financial condition, many financial institutions are already optimizing their costs and revising their plans, especially in retail lending; SME lending will depend on the dynamics of quarantine withdrawal.

The summary opinion of the conference participants can be formulated as follows: "Saving economic entities that are experiencing financial difficulties through quarantine is the prerogative of the state, and I would like to see it more effective in this direction. The current crisis has shown that state institutions, including the judiciary, are not quite ready for life in an epidemic. Therefore, a global business continuity plan is needed to quarantine the economy with the least losses, as well as for timely readiness and resistance at the state level to future challenges. "

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