Mortgage may become cheaper: legislation will be aligned with EU standards
As previously reported by «Judicial and Ledal Newspaper», the Verkhovna Rada adopted in principle draft law No. 15172 «On Securitization and Covered Bonds». The document is designed to bring the Ukrainian financial market closer to EU standards and create conditions under which banks will be able to attract significantly more funds for long-term lending to citizens and businesses.
The main goal of the changes is to allow banks to convert already issued long-term loans (for example, mortgages) into liquid securities. Instead of waiting 10-20 years for borrowers to repay their debts, the bank will be able to attract money from investors secured by these loans and immediately direct the received funds to issuing new loans, emphasizes the Ministry of Economy, Environment and Agriculture.
«The adoption of this law creates market prerequisites for a systemic reduction in the cost of credit resources for citizens and businesses. We are introducing new long-term investment products and bringing Ukrainian legislation closer to EU standards. This will allow banks to obtain resources from investors at a lower discount, which will ultimately stimulate competition and reduce the cost of loans, including mortgages,» said the Deputy Minister of Economy, Environment and Agriculture of Ukraine, Yehor Perelyhin.
What changes the draft law provides
Introduction of new securities: Modern instruments are introduced — securitization bonds and covered bonds. They will allow attracting "long" money into the economy, including from non-state pension funds and foreign investors.
Creation of specialized financing platforms: These are new intermediary companies (specialized financial companies - SPVs) that will buy pools (packages) of loans from banks and issue securities secured by them. This mechanism guarantees transparency of the process.
Double level of investor protection: A person or company that acquires new bonds will have the right to demand payment both from the issuing bank itself and from the property that serves as collateral (the cover pool).
Immunity from bank bankruptcy: If a financial institution becomes insolvent, investors' money and pledged property will not be included in the bank's general liquidation mass, meaning they cannot be taken to repay other debts.
Introduction of independent control: The market will gain new infrastructure participants. Among them are "independent controllers of the cover pool," who will constantly monitor the status of the collateral, and "special administrators" who will take over loan management in case of bank closure.
Implementation of the EU quality standard (Simple, Transparent and Standardised — STS): simple, transparent, and standardized. To confirm that the securities are simple, transparent, and standardized (as it works in Europe), special authorized verification agents will operate. The entire market will be supervised by the National Securities and Stock Market Commission.
Legislative update: The draft law comprehensively amends more than 15 existing laws (on banks, capital markets, the depository system, etc.) and repeals the outdated law «On Mortgage Bonds». Separate draft amendments to the Tax and Civil Codes will be submitted to fully complete the reform.
Effectively, the draft law creates a mechanism for the multiple use of bank capital, which allows significantly increasing the potential for lending to the economy without proportionally increasing the banks' resource base. The law not only introduces new instruments but transforms bank credit from a "one-time" asset into an asset that can repeatedly support new financing of the economy.
Subscribe to our Telegram channel t.me/sudua and to Google News SUD.UA, as well as to our VIBER and WhatsApp, our page on Facebook and on Instagram to stay informed about the most important events.
