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    'Time Bomb': Ukrainian Banks Struggling With Bad Loans

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    Ukraine’s banking crisis is a time bomb as many of the loans taken from banks will never be paid back, the German newspaper Die Welt wrote.

    According to the National Bank of Ukraine, 30.5 percent of loans are “bad.” Analysts believe that the figure is around 50 percent.

    The National Bank recently said that the situation was looking up in the wake of last year’s record loss of an estimated 159 billion ($5.9 billion), but warned that the huge number of problem loans could result in a new crisis.

    While state-owned banks make no secret of their plight, some privately-administered financial institutions refuse to wake up to reality.

    Ukraine’s banking sector has been in recession since 2014 due to the conflict in Donbass, the oligarchic economic system and rampant corruption, Die Welt wrote, adding that the latter is the most serious of them all.

    “Inspectors have provided guarantees to problem banks for too long letting their owners to siphon off money. The banks find it hard to get their money back because litigation expenses cost their clients less than paying interest on the loans they take,” Die Welt wrote.

    “As Ukrainians say ‘Only cowards pay back their loans,’” the newspaper added.

    Looking on the bright side, Die Welt said that inflation was notably down and the banks were now lending at a 14 percent yearly interest rate instead of 24 percent as before.

    The banks still have problems with making profit though and the nationalization of PrivatBank only added to their woes by increasing the state’s share in this sector,” the newspaper concluded.

    The banking sector in Ukraine continues to face challenges in the area of credit growth stemming from unresolved problem loans and issues with solvency, Fitch Ratings agency said in a December 2016 release.

    The rating agency noted that sovereign debt exposure of the Ukrainian banking sector has recently grown, but was primarily held by state-owned banks.

    Ukraine relies heavily on foreign assistance to support its economy and repay its debts amid the ongoing conflict between the central government and pro-independence forces in the country's southeast.

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    Tags:
    conflict in Donbass, bad loans, banks, crisis, corruption, Privatbank, National Bank of Ukraine, Fitch Ratings, Ukraine
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