OREANDA-NEWS. In June, the Verkhovna Rada of Ukraine passed a draft law on restructuring of debt obligations under foreign currency loan agreements in its first reading (registered as No. 4185а-2 of July 1, 2014). The draft law allows borrowers to repay their outstanding foreign currency-denominated debt obligations in national currency (registered as No. 4185а-2 of July 1, 2014).

The move was preceded by sustained consultations involving representatives from the business community, members of the public, and law makers, which resulted in a compromise solution that would allow borrowers with outstanding mortgage loans denominated in foreign currency to settle their debt obligations.

“The underlying provisions of the above-mentioned draft law that have been drawn up in accordance with the principles of social responsibility of the state and businesses, and the principle of the rule of law guarantee fair protection of consumers of financial services," noted Governor of the National Bank of Ukraine Valeriia Gontareva.

In particular, the draft law envisages the recalculation of outstanding obligations under foreign currency loan agreements into national currency using the official hryvnia to foreign currencies exchange rate set on the date when the debt restructuring occurs and the price charged for the loan is set following the recalculation. The price charged for the loan will remain effective until a loan agreement expires and include a revised fixed interest rate charged on the loan before the debt restructuring occurred. The amount of monthly payment made to repay the restructured debt should not exceed the amount of monthly payment under the same loan agreement before the outstanding debt was restructured and recalculated into national currency using the official hryvnia to foreign currencies exchange rate set as at January 1, 2014.

The draft law also envisages that borrowers may redeem their debt under foreign currency loans secured by mortgages on real estate as collateral by transferring the mortgaged property to the holder (bank). The transfer of mortgaged property gives legal grounds to terminate the loan agreement. This includes cases when the value of the mortgaged property is not sufficient enough to enable the borrower fully settle debt obligations.

“We should not forget about a difficult financial and economic situation facing our country. The proposed draft law envisages a mechanism allowing the state (due to amendments to the Tax Code of Ukraine), banks and individual borrowers to share financial responsibility, which is viewed as a compromise solution by the regulator," noted the Governor of the National Bank of Ukraine.