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Kyiv Post Legal Quarterly - - Banking -

But an­other rea­son for non- per­form­ing loans is not fraud, but eco­nomic cri­sis.

Those who took out hard cur­rency loans be­fore the 2013 cri­sis saw the cost of re­pay­ment sky­rocket as the hryv­nia lost two-thirds of its value fol­low­ing the Euro­maidan Rev­o­lu­tion.

“Some cus­tomers in this sit­u­a­tion, in­stead of find­ing a way to even reach an agree­ment with the bank on how to re­solve the is­sue, run away… with the money in their pocket,” Ma­chio said.

The con­se­quences of fail­ing to re­pay­ing a loan "are not ex­tremely se­ri­ous” to the bor­rower, Ma­chio said, but hurt prospec­tive bor­row­ers as banks cur­tail credit and im­pose tougher stan­dards for loans.

Sh­pek, who is also the chair­man of Ukraine’s In­de­pen­dent Bankers As­so­ci­a­tion, says that part of the prob­lem is that the gov­ern­ment has led by bad ex­am­ple. For in­stance, the State Fis­cal Ser­vice still fails to re­turn value-added tax re­funds to banks promptly.

The gov­ern­ment is not trans­par­ent in iden­ti­fy­ing prob­lem bor­row­ers.

Sh­pek said that it makes sense to es­tab­lish a data­base of bor­row­ers for banks to con­sult in or­der to iden­tify in­di­vid­u­als who re­peat­edly fail to re­pay loans.

While Ukrainian tax­pay­ers de­serve to know who doesn't re­pay loans – since it’s their money that ef­fec­tively goes to cover de­positers' losses – bank se­crecy laws for­bid the dis­clo­sure of such in­for­ma­tion by the gov­ern­ment.

“But it would be pos­si­ble to re­lease this in­for­ma­tion from open sources,” Sh­pek added.

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