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Many Ukrainian Banks Face Problems Due to Having Lent to the Business of Their Founders

Date of publication: 14 November 2013

Source: «RBK-Ukraine»

Problems faced by many Ukrainian banks result from extensive lending to various, not always successful, business projects of their founders. This is the point of Maksym Kopeychykov, Partner at Ilyashev & Partners.

According to the lawyer, the feature of the banking system of Ukraine and a number of other post-Soviet countries is that financial institutions actively lend money to companies that are affiliated with the founders of these banks.

«At first glance, companies receiving huge loans have nothing to do with the founders of banks. But after connecting the dots it becomes clear to whom the loan was actually extended. This kind of scheme is used to bypass the limit on disbursing loans to bank insiders», explained Kopeychykov.

According to Mr. Kopeychykov, such lending mechanisms may adversely affect the liquidity of a bank, and Ukraine has seen enough of it.

«Today, many banks are experiencing some difficulties with the collection of loans that were granted to companies controlled by the former founders of the financial institutions», he concluded.