Danchenko V. Legal regulation of non-performing (problem) assets in banking sector

Danchenko V. Legal regulation of non-performing (problem) assets in banking sector. – Qualification scientific work on the rights of the manuscript. Danchenko V. L. Dissertation for the Doctor of Philosophy degree in the specialty 081 ‘Law’ – The Scientific Institute of Public Law, Kyiv, 2024. The dissertation provides a theoretical summarizing and new solution to scientific task the aim of which is to clarify the essence and distinguish the peculiarities of legal regulation of non-performing (problem) assets in banking sector and to elaborate on the proposals and recommendations on the improvements of administrative legislation in this field taking into consideration positive domestic and foreign experience. The dissertation emphasizes that despite the relative financial stability, one of the key factors currently obstructing the operation of banks in particular and of banking system as a whole is increase in the number of problem (non-performing) assets. This entails 1) the decrease in the quality of bank assets; 2) increase of losses (or unearned profit) on credit operation; 3) decrease in the general level of profitability of shareholders; 4) reduction in the level of public trust in the bank. The author summarizes that the problem (non-performing) assets in banking system are the assets that do not generate the expected income and pose an increased risk to bank financial stability. These assets include loans, advance payments and other financial instruments on which the borrowers do not satisfy their payment obligations on time and in full within the specified period (usually more than 90 days). The problem assets require special accounting, management and regulation to minimize financial losses and maintain the appropriate level of liquidity and solvency. The author suggests dividing the factors that lead to the emergence of non-performing (problem) assets into three groups: 1) external factor, in particular: а) normative legal; b) political; c) financial and economic; d) security; e) demographic; 2) internal factors which include: а) organizational and managerial; b) personnel; c) informational and analytical. The author highlights the disadvantages of state financial policy regarding banking sector, namely some chaotic government actions at the beginning of the full-scale invasion resulting in undermining public trust in banking system; introduction and liquidation of population support programs especially on credit payments; absence of defined strategy for the development of banking system and increasing the level of public trust in it. The author has established the fact that administrative-legal regulation of non-performing (problem) assets in banking sector is a regulatory and structuring influence of law on social relations carried out with the help of normative legal acts of different legal force in order to ensure legal, efficient and effective functioning of social relations. The author also highlights and describes the system of normative legal acts of different legal force with the norms aimed at regulating social relations in this field. It is summarized that today the system of legal principles for regulation of non-performing (problem) assets in banking sector is represented by a large number of normative legal acts of different legal force each of which regulates separate aspects of functioning and management of this financial and legal phenomenon. The author notes that the vast majority of non-performing (problem) assets management aspects is regulated by subordinate and departmental legal acts. This issue is poorly regulated at the legislative level thus this is considered as a significant drawback. It is found out that administrative-legal mechanism for the regulation of non-performing (problem) assets in the banking sector is an ordered set of elements determined by the norms of administrative law aimed at regulating and ensuring the effective functioning of legal relations in the process of carrying out organizational and managerial activities in the particular area of social life. The author notes that the administrative law norm is a key element of the administrative-legal mechanism for regulating non-performing (problem) assets in the banking sector. This norm establishes clear criteria and procedures to be followed by banks, regulators and other involved parties in the process of managing the assets.