The Association of Ukrainian Banks has called on President Viktor Yushchenko to veto the law No. 3459-1 that the parliament adopted on May 21, which imposed a moratorium on repossession of citizens' private residential buildings that are used as collateral for loans.
The association made the call in a statement.
“The Association of Ukrainian Banks is drawing attention to the unacceptability of introduction of the law in the version in which it was adopted, and it is calling on the President of Ukraine to veto the ‘Law on Protection of the Property Rights of Citizens during the Period of Recovery from the Financial Crisis,’ which is registered as No. 3459-1,” the association said in the statement.
The association stressed that introduction of this law would result in entire portfolios of banks’ mortgage loans becoming unsecured, thus requiring banks to create additional reserves against the loans issued by them (more than USD 100 billion).
“The equity capital of banks amounted to UAH 124.5 billion as of April 1, 2009. Creation of additional reserves will result not just in losses among some banks, it will essentially mean full recapitalization of the banking system,” the association said in the statement.
According to the association, depositors and other clients of financial institutions will suffer from deterioration of the solvency of banks as a result of the adoption of this law.
Moreover, the association said that the law No. 3459-1 was adopted in violation of the parliament’s regulations because it was not considered by the relevant parliamentary committee and comments by the parliament’s scientific and expert department were not taken into account.
As Ukrainian News earlier reported, the parliament approved the law No. 3459-1 by 237 votes on May 21.
The National Bank of Ukraine and the Ukrainian Credit and Banking Association have also called on Yushchenko to veto the law.
