Ukraine: NBU Amends Currency Legislation

Continuation of the currency market liberalization

Within the framework of its gradual liberalization policy the National Bank of Ukraine (NBU) introduced certain changes to the applicable currency legislation. The relevant changes were approved by NBU Resolutions No. 372 dated 18 August 2016 and No 386 dated 14 September 2016, which came into force on 18 August and 15 September 2016, respectively. Resolution No. 386 will be in effect until 15 December 2016.

NBU introduced the following novelties:

  • It is now allowed to purchase foreign currency for clients that have on their bank accounts their own foreign currency, provided that such funds, together with the purchased foreign currency, are used to repay a foreign currency loan to a foreign creditor.
  • It is now permitted to shorten the periods set for a resident non-bank entity to repay loan or credit in foreign currency to a non-resident entity (creditors) in order to restructure its debt where the claims of the creditor in respect of the principal amount are accounted as an additional contribution of that creditor into the equity capital of the resident entity.
  • The previous limit of UAH 100,000 (expressed in foreign currency) per day for withdrawal of funds by customers from their FX accounts was increased to UAH 250,000.
  • The requirement for Ukrainian importers to obtain statements on the expert assessment of market prices from the State Information and Analysis Center for Monitoring of External Commodity Markets (SE Derzhzovnishinform) was cancelled. Such statements were necessary to pay for services (works and intellectual property rights) purchased from a non-resident entity in an amount over EUR 50,000.

The following anti-crisis measures continue to be in effect:

  • The restriction on early repayment under loan agreements between Ukrainian borrowers and foreign creditors (subject to certain exceptions).
  • The threshold for mandatory conversion of foreign currency proceeds received from abroad into Ukrainian is 65 percent of the amount received.
  • It is allowed to repatriate dividends to foreign shareholders of Ukrainian companies for 2014 and 2015 in the amount not exceeding in each calendar month the higher of (a) USD 1 million (in equivalent); or (b) 10 percent of all such dividends that should be paid to a shareholder but not more than USD 5 million (in equivalent) in each such calendar month.
  • With certain exceptions, banks are still prohibited from purchasing and transferring foreign currency for clients under individual licenses issued by the NBU.
  • Banks are still prohibited from the purchase and transfer of foreign currency to foreign investors in certain cases concerning the sale of shares/corporate rights in Ukrainian companies as well as the return of capital (e.g. a decrease of a company's charter capital or the foreign investor's withdrawal as a participant/shareholder in a company).
  • The period for settlements under transactions related to export and import of goods remains 120 days.
  • Banks are prohibited to extend loans in national currency, if such loans are secured by pledges of funds in foreign currency.

Introduction of indicators of a risky financial transaction

Together with the above measures of liberalization a requirement was introduced for banks to carry out additional inspection of their clients and additional documents (information) about financial transactions demonstrating clear indicators of a risky financial transaction. Based on the results of such inspection the banks may decline such financial transactions. NBU Resolution No. 369 dated 15 August 2016 lists the following as indicators of a risky financial transaction, inter alia:

  • Incompliance between the substance of financial transactions to the core business of the client, counterparty;
  • Transfer of funds under the agreement outside of Ukraine for the benefit of a third party (not to a direct counterparty);
  • Transfer of funds under the agreement are made:
    • Under surety agreements;
    • For the benefit of the assignor;
    • By the party that acquired the obligations as a result of a debt transfer;
    • Using setoff.
  • Disbursement of a cross-border loan to a non-resident exporter (without actual transfer of funds to the Ukrainian borrower's bank account in Ukraine);
  • The party to a financial agreement is registered in a country specified as an off-shore jurisdiction by the Cabinet of Ministers of Ukraine;
  •  Payment of dividends to a foreign investor;
  • Other indications of a risky financial transaction (at the bank's discretion).

The provisions of Regulations No. 369 do not apply to the financial transactions (save for purchase/transfer of foreign currency outside of Ukraine for the purpose of payment dividends to a foreign investor), in particular carried out:

  • For the benefit of the state or under state guarantees;
  • By resident entities to the international financial institutions;
  • Under agreements entered into by resident entities with international companies (including their subsidiaries and affiliated companies) from the list of 2,000 largest public companies globally (Forbes Global 2000).

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