NBU: 2014 moratorium on interest for military personnel may limit their access to loans, requires objective assessment
The moratorium on fines and interest on loans for military personnel, which was legally introduced in 2014, may today complicate their access to consumer lending, in particular in the form of credit limits on cards, so the situation requires an objective assessment and possible legislative changes, the National Bank of Ukraine (NBU) believes.
"Currently, a situation has arisen where the moratorium on the accrual of penalties and interest payments for failure to fulfill obligations towards servicemen and their spouses, instead of helping, may lead to restrictions on the military's access to consumer loans, in particular in the form of a credit limit on cards (the moratorium does not apply to mortgage loans)," the NBU told Interfax-Ukraine.
The Central Bank said the moratorium on the accrual of penalties and interest payments for failure to fulfill obligations towards servicemen and their spouses, introduced in 2014, was aimed at defenders who joined the ranks of the Armed Forces of Ukraine and at that time had debt on loans.
"The unexpected start of the war, mobilization, required a quick decision to support our defenders, who received consumer loans even before the war, and after joining the ranks of the Armed Forces of Ukraine, they needed support to resolve the issue of paying off the loan," the National Bank said.
It noted that the number of military personnel has increased significantly over the three years of full-scale war, and the provision of new interest-free consumer loans may create a challenge for the banking system.
"There is no such thing as free money from banks. Banks pay interest on deposits and must cover operating expenses. Potential losses of banks create risks primarily for depositors and may negatively affect their confidence in the banking system," the NBU said.
The National Bank said banks are already actively offering military personnel free use of premium banking packages and additional services and are ready to expand their offers for defenders.
According to the NBU, in a market economy, any moratorium has only a short-term effect, and in the longer term leads to a restriction of the supply of goods and services to which it applies, over time restraining the development of a particular direction. As an example, the central bank cited the introduction of state regulation of fuel prices at the beginning of a full-scale invasion, which led to its temporary shortage in the market.
"The National Bank is always open to dialogue on this issue and we have repeatedly raised it in discussions with representatives of the government and parliament in order to form a joint objective assessment of the situation and develop possible legislative initiatives aimed at a balanced solution to the specified issue," the regulator summed up the situation with the moratorium.
As reported, the discussion on the moratorium intensified after a recent high-profile complaint on Facebook, in which a monobank client said that after informing the bank about his military status, the bank reduced the loan rate to zero, but at the same time reduced the credit limit to zero. The comments to this post noted that this is not only a problem for monobank, but also for many large banks. Monobank co-founder Oleh Horohovsky also stated that all large banks operate according to a similar scheme.
Bankers call for a clear regulation of the mechanism of preferential lending to military personnel, noting that the financial system will not withstand the mass issuance of interest-free loans without a specific source of compensation, as established by law.
According to clause 15 of article 14 of the law On social and legal protection of military personnel, banks and other institutions are prohibited from charging interest, fines and penalties on loans to military personnel called up during mobilization or those participating in measures to protect the country during a special period.
