NBU determines criteria for write-off of banks' impaired financial assets

"A bank may write off impaired financial assets in the absence of reasonable expectations about their recovery. The write-off occurs if the reserve was formed for such an asset in accordance with IFRS 9 Financial Instruments in the full sum of its gross carrying amount and if one or more of the following criteria apply: overdue repayment of the debt or a part of it exceeds 36 months; the bank did not receive any significant payments in the previous 36 months (more than 10% of the carrying amount of such an asset); the bank did not receive any significant receipts from the sale of the pledge or the enforcement of the security, or the bank did not have access/redemption/recovery of the collateral during the previous 36 months; the bank failed to sell such a financial asset three times in a row; the bank has information that the debt on this asset has been written off by another bank," the report reads.

It notes that the bank has no right to determine more favorable criteria for writing off the impaired assets of debtors related to the bank.

The NBU noted that the write-off is not debt forgiveness. The bank may continue to settle the debt to recover it.

Banks are tasked with analyzing impaired assets for the presence of these criteria and writing them down every year, starting from 2020, until October 1. The relevant information should be provided to the National Bank of Ukraine by November 1 of the current year.

These criteria are defined by NBU Board resolution No. 49 of April 13, 2020 on determining the criteria for the write-off of impaired financial assets of Ukrainian banks at the expense of valuation reserves for expected credit losses. The resolution enters into force on the day following the day of its official publication.

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