Household Debts: Global Experience of Restructuring Debts and Ukrainian Reality
Kornіvska V. O., Yaremenko O. L.

Kornіvska, Valerіia O., and Yaremenko, Oleh L. (2021) “Household Debts: Global Experience of Restructuring Debts and Ukrainian Reality.” The Problems of Economy 2:194–202.
https://doi.org/10.32983/2222-0712-2021-2-194-202

Section: Finance and banking

UDC 336.717.8:[330.1:004.7](477)

Abstract:
The research results on the global problem of household debt growth, its causes, consequences, social context, and influence on the formation of aggregate demand are presented. It is substantiated that with the growth of debts, households are losing their share in aggregate demand, and the state is becoming an increasingly influential player compared to others due to the strengthening of fiscal and regulatory government influence. Facing the increasing debt pressure, households start reducing consumption, thus negatively affecting aggregate demand. The government, on its part, trying to improve the situation, increases subsidies and provides policies that encourage banks to restructure loans, develops restructuring programs, etc. These trends are proven to be of an urgent character and should not be routinized, in order not to distort the market environment or increase the direct influence of the state on purely market processes. The analysis of global experience, carried out in the article, shows that in the condition of economic destabilization debt restructuring is the only way to help the population out of the debt trap. Special attention is paid to the analysis of the ways to harmonize the accumulation of household debt through restructuring, to identify its market mechanisms, and to prove that the state should provide extensive assistance to households trying to overcome the debt trap. Three options for the state participation in the restructuring process have been identified: institutional participation (when the state only provides regulatory support); design and implementation of state restructuring programs; adoption of regulations on compulsory restructuring. New Ukrainian norms and regulations related to forced debt restructuring are analyzed, and their social context is proved to be contradictory. On the one hand, the adoption of corresponding laws became a significant step towards maintaining the social stability of the Ukrainian population against the background of the growing poverty and increasing total indebtedness of the people (even in the sphere of payments for public utility services), and the growing currency risks. On the other hand, Ukrainian market players often show moral hazards of non-compliance with the conditions of debt discipline, which have become part of the financial behavior, negatively affecting the general financial culture.

Keywords: debt restructuring, forced debt restructuring, household debts, state restructuring programs.

Bibl.: 30.

Kornіvska Valerіia O. – Doctor of Sciences (Economics), Senior Research Fellow, Department of Economic Theory, Institute for Economics and Forecasting of NAS of Ukraine (26 Panasa Myrnoho Str., Kyiv, 01011, Ukraine)
Email: vkornivska@ukr.net
Yaremenko Oleh L. – Doctor of Sciences (Economics), Professor, Head of, Sector of Institutional Economics of the Department of Economic Theory, Institute for Economics and Forecasting of NAS of Ukraine (26 Panasa Myrnoho Str., Kyiv, 01011, Ukraine)
Email: v.o.yaremenko@gmail.com

List of references in article

Croxson, K., Lund, S., and Roxburgh, Ch. “Working out of debt“. McKinsey Quarterly. January 1, 2012. https://www.mckinsey.com/featured-insights/employment-and-growth/working-out-of-debt
“Zhile. Sem let rynka nedvizhimosti Kiyeva v shesti grafikakh. Istoriya v tsifrakh“ [Housing. Seven Years of the Kyiv Real Estate Market in Six Charts. History in Numbers.]. Liha.Biznes. https://biz.liga.net/all/nedvizhimost/article/sem-let-rynka-nedvijimosti-kieva-v-shesti-grafikah-istoriya-v-tsifrah
Debt and Deleveraging: The Global Credit Bubble and Its Economic Consequences. Seoul; San Francisco; London; Washington: McKinsey Global Institute (McKinsey), 2010.
Debt and Deleveraging: Uneven Progress on the Path to Growth. Seoul; San Francisco; London; Washington: McKinsey Global Institute (McKinsey), 2012.
Atif, M., Rao, K., and Sufi, A. Household Balance Sheets, Consumption, and the Economic Slump. Chicago: University of Chicago Booth School of Business Working Paper, 2011.
World economic outlook: Growth resuming, dangers remain. International Monetary Fund, April 2012.
Rajan, R., and Zingales, L. “Financial Dependence and Growth“. American Economic Review, vol. 88 (June) (1998): 559-586.
Krugman, P. “Debt Is (Mostly) Money We Owe to Ourselves. 2011“. http://krugman.blogs.nytimes.com/2011/12/28/debt-is-mostly-money-we-owe-to-ourselves
Olney, M. L. “Avoiding Default: The Role of Credit in the Consumption Collapse of 1930“. The Quarterly Journal of Economics, vol. 114, no. 1 (1999): 319-335.
Snowden, K. Jr. “The Anatomy of a Residential Mortgage Crisis: A Look Back to the 1930s. 2010“. In The Panic of 2008: Causes, Consequences and Proposals for Reform. Northampton, Massachusetts: Edward Elgar.
Yudina, T. “Zakonoproekty pro restrukturyzatsiiu bankivskykh kredytiv nesut zahrozu ekonomichnoi kryzy - eksperty“ [Bills on the Restructuring of Bank Loans Pose a Threat of Economic Crisis - Experts]. https://www.unn.com.ua/uk/news/1924839-zakonoproekti-pro-restrukturizatsiyu-bankivskikh-kreditiv-nesut-zagrozu-ekonomichnoyi-krizi-eksperti
“Pryiniato za osnovu proekt Zakonu «Pro vnesennia zmin do rozdilu IV «Prykintsevi ta perekhidni polozhennia» Zakonu Ukrainy «Pro spozhyvche kredytuvannia» (shchodo kredytiv, nadanykh v inozemnii valiuti)»“ [The Draft Law "On Amendments to Section IV" Final and Transitional Provisions "Of the Law of Ukraine" On Consumer Lending "(For Loans Granted in Foreign Currency)" Was Adopted as a Basis]. https://www.rada.gov.ua/news/Novyny/205486.html
Ofitsiinyi sait UkrSybbanku. BNP Paribas Group. https://my.ukrsibbank.com/ru/personal/credits/pf_loans_restructuring
“American consumer credit counselling“. https://www.consumercredit.com/debt-restructuring
Ofitsiinyi sait KPMG. https://home.kpmg/ua/ru/home/services/advisory/deal-advisory/restructuring-services.html
Laeven, L., and Laryea, Th. “Principles of Household Debt Restructuring“. https://www.imf.org/external/pubs/ft/spn/2009/spn0915.pdf
“NBU. Zvit pro finansovu stabilnist. Cherven 2020 roku“ [NBU. Financial Stability Report. June 2020]. https://bank.gov.ua/admin_uploads/article/FSR_2020-H1.pdf?v=4
“NBU. Zvit pro finansovu stabilnist. Hruden 2020 roku“ [NBU. Financial Stability Report. December 2020]. https://bank.gov.ua/admin_uploads/article/FSR_2020-H2.pdf?v=4
“World Bank Doing Business database“. www.doingbusiness.org/en/data
“Ease of doing business in Ukraine“. World Bank Doing Business database. https://www.doingbusiness.org/en/data/exploreeconomies/ukraine#DB_ri
“Total credit to households (core debt) (As a percentage of GDP)“. BIS. https://stats.bis.org/statx/srs/table/f3.1
“Dani Federalnoi rezervnoi systemy SShA“ [Data from the US Federal Reserve]. www.federalreserve.gov
“Analitychnyi resurs Statista“ [Analytical Resource Statista]. https://www.statista.com/statistics/248289/home-mortgage-sector-debt-outstanding-in-the-united-states/
“Analitychnyi resurs Debt“ [Analytical Resource Debt]. https://www.debt.org/faqs/americans-in-debt/demographics/
“Analitychnyi resurs Tradingeconomics“ [Analytical Resource Тradingeconomics]. https://tradingeconomics.com/
“Opytuvannia pro umovy bankivskoho kredytuvannia“ [Survey on the Conditions of Bank Lending]. Ofitsiinyi sait NBU. https://bank.gov.ua/ua/news/all/banki-vidznachayut-zrostannya-popitu-biznesu-y-domogospodarstv-na-krediti-ta-vvajayut-ipoteku-vagomim-rushiyem-podalshogo-pojvavlennya-popitu-naselennya--opituvannya-pro-umovi-bankivskogo-kredituvannya
“Ohliad bankivskoho sektoru. NBU. Traven 2021 roku“ [Overview of the Banking Sector. NBU. May 2021]. Ofitsiinyi sait NBU. https://bank.gov.ua/admin_uploads/article/Banking_Sector_Review_2021-05.pdf?v=4
“Intervyu s demografom“ [Interview with a Demographer]. https://biz.liga.net/pervye-litsa/all/interview/akademik-ella-libanova-karantin-i-distantsionnoe-obuchenie-usilivayut-neravenstvo
“Tarifnyy kapkan dlya pravitelstva Shmygalya“ [Tariff Trap for the Shmygal Government]. Ekonomicheskaya pravda. https://www.epravda.com.ua/rus/columns/2021/04/26/673357/
“Vstupili v silu zakony o restrukturizatsii valyutnykh kreditov“ [Laws on the Restructuring of Foreign Currency Loans Came into Force]. https://biz.ligazakon.net/ru/news/203149_vstupili-v-silu-zakony-o-restrukturizatsii-valyutnykh-kreditov