On 14 February 2013, the National Bank of Ukraine (the "NBU") issued an electronic notification No. 29-213/1846-1878 to the NBU’s territorial divisions, banks and banking associations, explaining its position on the application of the Ukrainian law requirement for maximum floating interest rate increases to foreign law governed loan agreements (the "Notification").

In particular, part 6 of Article 10561 of the Civil Code of Ukraine requires that a loan agreement providing for a floating interest rate must specify the maximum extent of increase of such an interest rate.

If foreign law is chosen as the governing law of a loan agreement, Ukrainian law provisions do not apply, except for the mandatory rules of Ukrainian legislation which apply irrespective of whether foreign law is applicable.

In its Notification the NBU expresses the position that the requirement to specify the maximum floating interest rate increase in the loan agreements set forth in paragraph 6 of Article 10561 of the Civil Code of Ukraine is a mandatory rule of Ukrainian legislation, and, therefore, shall also apply to any loan agreement governed by a foreign law.

Although explanatory letters of the NBU are not binding regulations under Ukrainian law and the parties to the loan agreement are not obliged to follow the explanation of the NBU expressed in the Notification, there is a risk that the NBU may refuse to register a cross-border loan agreement that does not contain the provision determining the maximum floating interest rate increase. As this provision of the Civil Code of Ukraine is effective as of 16 October 2011, it is also not clear how the Notification may affect the preexisting cross-border loan agreements that were concluded after 16 October 2011 but that do not specify the maximum floating interest rate increase.