Banking, investments and exchange controls

Author: | Published: 1 Dec 2009
Email a friend

Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

BC Toms & Co

Address

1 Laboratornyi Side Str, Office 509 Kyiv 01133, Ukraine

Telephone

+38 044 4906000

Fax

+38 044 2786508

In an attempt to mitigate the financial consequences of the recession, the National Bank of Ukraine (NBU) and the Ukrainian Parliament have recently supplemented their regulation of external borrowings and and the temporary administration of banks. This note reviews some of these measures.

The NBU re-established, effective as of November 15 2009, by Resolution 614 On Some Issues on the Registration of Credit Agreements (Loan Agreements) in Foreign Currency Entered into between Resident Borrowers and Non-Residents, dated October 15 2009, interest-rate limitations for loans in hard currencies between non-resident lenders and Ukrainian borrowers. One consequence of this concerns amendments to such foreign loan agreements registered by the NBU before November 15 2009. The parties to such amendments will now have to ensure that the total amount of the payments to be made by the borrower under such an amended agreement, including interest, fees, commissions, default interest and any other payments, will not exceed the re-established maximum interest rate, unless the amendments only result in a change of the name, registered office or bank details of the resident borrower or the non-resident lender, or in the transfer of any or all of the debt from one non-resident lender to another non-resident lender.

The new maximum interest rate limits are 9.8% per annum under fixed-interest rate loans with a maturity of up to one year, 10% per annum under fixed-interest rate loans with a maturity of one to three years, 11% per annum under fixed-interest rate loans with a maturity exceeding three years and a rate of Libor plus 750 basis points per annum for three-month deposits in US dollars under floating-interest rate loans.

In addition, on August 5 2009, the Law of Ukraine On Amending Some Legislative Acts of Ukraine Regarding the Peculiarities of Measures on the Financial Recovery of Banks 1617-VI (the Recovery Law) dated July 24 2009, took effect. The Recovery Law supplements the list of the grounds based on which the NBU may establish the temporary administration of a bank, by including as new grounds the violation of anti-money laundering laws and the performance of high risk operations that result or may result in a loss of assets or profits by a bank. Some of the existing grounds were also amended to allow greater opportunities for the NBU to initiate such temporary administrations.

In addition, temporary administrators are now given additional powers. In particular, a temporary administrator is now authorised to take a decision on the reorganisation of a bank, whereas previously a bank reorganisation could only be carried out based on the decision of the owners of the bank or the NBU. Temporary administrators are also now relieved from the necessity to follow certain rules in relations with a third party when implementing a programme on the financial recovery of a bank, including when reorganising a bank and assigning debts and rights of demand.

The Recovery Law makes a moratorium on the satisfaction of the claims of bank creditors, if applied for by the NBU, applicable to creditors' claims under obligations maturing both before and after the establishment of a temporary administration. The maximum duration of such a moratorium has been reduced from six to three months. The NBU is, however, authorised by the Recovery Law to extend by six months any moratorium established before the Recovery Law took effect.