The National Bank of Ukraine (the "NBU") has recently amended the Regulation on the Procedure for Obtaining Foreign Currency Loans by Residents and Extending Foreign Currency Loans by Residents to Non-Residents, approved by the resolution of the NBU Management Board dated 17 June 2004, No. 270 ("Regulation 270").
Under the existing procedure Ukrainian borrowers generally need to submit for registration their loan agreements with foreign lenders to a local department of the NBU. The NBU issues a loan registration certificate specifying the names of the lender and the borrower, the principal amount and maturity of the loan, the interest rate and any other amounts payable under the loan, as well as the applicable interest rate cap. Prior to registration a Ukrainian bank acting as servicing bank of the borrower has to sign off on the terms of the loan agreement and following registration such servicing bank is obligated to ensure that all payments are made strictly in accordance with the registration certificate.
The amendments to Regulation 270 will come into effect in November 2012, and include the following:
- Corporate borrowers will be applying for registration via servicing banks. They would have to submit to the relevant servicing bank a hard copy of the loan notification describing the terms of the loan transaction, as well as originals of the loan agreement and related documents. The servicing bank will verify the documents and apply for registration electronically. By default, the NBU will no longer be reviewing loan agreements, but may additionally request them along with any other documents it deems necessary.
- The statutory deadline for the review of the application by the NBU has been shortened from current seven business days to five business days.
- The NBU will no longer be issuing standalone registration certificates. Instead, the registration will be carried out by affixing a note to the loan notification prepared by the borrower. However, in line with the current procedure, only the changes in the data which is currently included in the registration certificate will be subject to registration with the NBU (i.e. changes relating to the parties, principal amount, currency and maturity of the loan, as well as interest rate, default interest, fees, commissions and any other payments under the loan).
- Borrowers would have to specify the value of the maximum increase of a floating interest rate in the loan notifications submitted for purposes of registration. The parties must specify such value in their floating interest rate loan agreements based on the rules of the Civil Code of Ukraine. It is not clear from the text of the amendments, however, if the NBU will require that such value be specified in all loan agreements or only those governed by Ukrainian law.
We note that electronic filing procedure similar to the one described above is already in place for registering loans borrowed by Ukrainian banks, and it is not expected that the introduction of such procedure for the other borrowers will cause technical issues at the time of implementation. The replacement of loan registration certificates with stamped notifications could also allow better disclosure of the terms of loans and improve servicing of loans by servicing banks.
For more information please, contact Nazar Chernyavsky or Olexander Olshansky.