The National Bank of Ukraine (the "NBU") reported on 23 October 2013 that its letter demanding parties to cross-border loan agreements to forecast maximum floating interest rate increases is no longer relevant.
As noted in our previous newsletter of 21 February 2013, the NBU shared its position regarding imperative provisions and public order in foreign law governed loan agreements in its Letter of National Bank of Ukraine No. 29-213/1846-1878 dated 14 February 2013 'Clarifications of Issues of Credit Relations between Residents and Non-Residents'. The regulator's position therefore posed a risk of refusal of registration of cross-border loan agreements, albeit governed by foreign law, lacking provisions stipulating a forecast of maximum floating interest rate increase at the time of conclusion of such agreements.
It is believed that the shift in the NBU's position was purported by, inter alia, a discrepancy between the NBU's interpretation of the Law of Ukraine 'On International Private Law' regarding imperative provisions and public order, and the legal nature of floating interest rates in cross-border loan agreements.
Due to such pivotal change in the NBU's view on the issue, it would appear that the risk of refusal of registration of foreign law governed cross-border loan agreements lacking provisions on a forecast of maximum floating interest rates, will be minimized.