Rada approves restart of factoring market

The Verkhovna Rada has adopted a law on regulating the factoring services market in Ukraine in accordance with world standards.

The Verkhovna Rada member from the Servant of the People faction, the head of the parliamentary committee on finance, tax and customs policy, announced this on his Telegram channel, the Ukrainian News agency reports.

The main provisions of the bill No. 12306, approved in the 2nd reading, provide for:

- implementation into the legislation of Ukraine of the provisions of the Model Law of the International Institute for the Unification of Private Law on Factoring, which will bring Ukrainian factoring closer to the best international counterparts;

- introduction of state registration of the assignment of the right of claim, which will reduce the risk of fraud during factoring activities and contribute to the transparency of the factoring market;

- determination of the subject and content of the factoring agreement;

- determination of the priority of the assignment of the right of monetary claim;

- delimitation of the regulation of trade factoring and operations with financial debt.

At the same time, the activities of companies providing services for the assignment of claims under consumer credit agreements will be carried out within the framework of a license for the activity of a financial company, which provides for the right to provide funds on credit and will be incompatible with the provision of trade factoring services.

Factoring is a type of unsecured financing in which the seller (supplier) assigns its rights to receive payment from the buyer (debtor) to a factoring company or bank (factor).

As a result, the seller receives part of the payment immediately, and the factoring company or bank assumes the risk of non-payment and maintaining accounts receivable.

Factoring is the second largest financial service in the non-banking financial services market of Ukraine.

However, the share of classic trade factoring in the non-banking financial market is insignificant.

Often, non-bank factoring concerns the assignment of monetary claims under problem loans.

As the Ukrainian News agency earlier reported, 13 financial institutions were deregistered in April.

The number of non-bank financial market participants in April decreased from 838 to 825, while the number of banks remained unchanged at 60.