NBU finalizes bill on factoring in Ukraine

MOSCOW. April 22 (Interfax) - The National Bank of Ukraine (NBU) is at the final stage of drafting a bill on factoring aimed at expanding business access to financing, Ukrainian media reported, citing Central Bank Deputy Chair Yekaterina Rozhkova as saying at the forum "Factoring in Ukraine: ideas for development", which is organized by the Independent Association of Banks of Ukraine (NABU) and the Ukrainian Trade Finance and Factoring Alliance with the assistance of the International Finance Corporation (IFC) and the United States Agency for International Development (USAID).

"The major innovations of the project are differentiation of trade factoring and collection activities and the registration of factoring transactions in the public state register, which will contribute to making the market more transparent and increasing the protection of parties to transactions," she said.

Rozhkova urged factoring market participants to join the discussion on the bill actively in order to finalize it by the end of the second quarter and submit the bill to the parliament in Q3 and to have a new law by the end of this year.

For his part, NBU Department of Methodology of Non-Banking Financial Institution Regulation Director Sergei Savchuk said that the law, in particular, would govern the possibility of recourse, that is, the factor's recourse with a reverse claim to the client in the event of failing to fulfill the debtor's monetary claim.

It is noted that the law will stipulate that the registrar should make an entry in the register of factoring transactions immediately after receiving an application from the factor. It is noted that the records will be kept for the period specified in the application, but at the same time, for no more than five years, however, the period may be extended at the factor's request.

Moreover, it is assumed that with the enactment of this law, the registered right of claim will have priority over the unregistered one.

This law will ensure compliance of factoring market regulation in Ukraine with international standards, primarily, the Convention and the model law of the International Institute for the Unification of Private Law (UNIDROIT), Savchuk said.

"I am sure that factoring can be one of the main tools to support the development of small and medium-sized businesses, which, following the example of developed countries, should become a cornerstone of the economy," Rozhkova said.