With effect from 7 February 2019 the Law of Ukraine “On Currency and Currency Transactions” and number of regulations of the National Bank of Ukraine (“NBU”) introduce new forex regime for Ukrainian and offshore residents simplifying administration of cross-border loans. In this newsletter we focus on the following key takeaways in respect of the cross-border loans1:
- cancellation of NBU’s registration requirements. A borrower is only required to notify NBU on cross-border loans via its account bank;
- effectiveness and validity of a loan agreement, assignment, novation is no more linked to the notification and/or registration process;
- voluntary prepayment by a borrower of a cross-border loans is permitted;
- maximum interest rate cap is cancelled and disapplies to loan interest rate. However, the onshore account bank of the borrower should screen the value of cross-border loan against the market terms including:
- benchmark (objective element), which will reflect cost of funds in particular currency on the international/local capital market (eg LIBOR/policy rate of the central bank applicable in a particular state);
- margin (subjective element), which will assess sovereign risk of Ukraine and individual risk of a particular borrower.