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The National Bank of Ukraine Expands the Opportunities for Banks to Perform Own FX Operations in the Interbank Market

29 March 2018

Press Release

 

In the view of favorable conditions on the foreign currency market, the National Bank of Ukraine (NBU) considers it feasible to alleviate outdated temporary administrative restrictions for banks and businesses since this move will not destabilize the FX market.

 

First, the NBU expands the opportunities for banks to perform own FX operations in the interbank market.

 

Previously, the limit for net purchases of foreign currency and investment metals within a business day was 0.5% and since 4 August 2017 - 1.0% of a bank’s regulatory capital. From 30 March this year this requirement will cease to exist, thus respective corrective measures for failure of compliance will be cancelled.

 

According to the NBU Board, this long-awaited decision by the financial market will enable banks to foster FX operations in the interbank market within one day and thus provide a more effective FX liquidity management. As a result, the NBU expects increase in trading operations and liquidity in the interbank market. Consequently, the NBU will decrease its presence on the FX market and the market will self-regulate and become more effective in terms of reaching equilibrium.

 

Second, the NBU has changed limits of the open currency position.

 

From 1 May this year the limit on total long open foreign currency position of a bank (L13-1) will be increased from 1% to 3%, the limit on total short open foreign currency position of a bank (L13-2) will be decreased from 10% to 8%. Therefore, banks will be more effective in redistributing foreign exchange risks.

 

Third, the NBU continues to loosen restrictions on early redemption of foreign loans and borrowings in foreign currency for Ukrainian companies.

 

Resident borrowers will have the option to repay such loans and borrowings early, if a foreign entity assuming in part or in full loan performance (by means of lending, insurance, guarantee or surety) has either a foreign government among its shareholders or a foreign bank with a foreign government being its shareholder.

 

Fourth, the NBU is expanding the list of business operations, which revenues will not be subject to the surrender requirement.

 

Onwards, the resident company will not be committed to sell funds transferred for repayment of a loan or borrowing, if a foreign entity assuming in part or in full loan performance (by means of lending, insurance, guarantee) has a foreign government among its shareholders. Furthermore, this exception applies only to cases, when the mentioned foreign government was rated no lower than A, as confirmed in a bulletin of one of the world’s leading rating agencies (Fitch Ratings, Standard&Poor’s, Moody’s).

 

Fifth, the NBU will scale down requirements for businesses on transferring foreign currency abroad for the purpose of payments associated with legal proceedings.

 

Resident borrowers with an individual license for transferring funds abroad can without restrictions to maximum amounts transfer foreign currency abroad for execution of court rulings, rulings of the international commercial court of arbitration or for discharging claims of parties under court rulings, rulings of the court of arbitration, and for collecting court, enforcement or administrative fees, as well as legal and enforcement proceedings’ fees charged to the borrower in accordance with foreign laws. The foreign government for the purpose of these requirements should have official rating no lower than A, as confirmed in a bulletin of one of the world’s leading rating agencies (Fitch Ratings, Standard&Poor’s, Moody’s).

 

Respective amendments were approved by NBU Resolution No. 31 On Amendments to Some Regulatory Documents of the National Bank of Ukraine dated 29 March 2018 and NBU Board Decision No. 184-D On the procedure of Setting Limits for the Open Foreign Currency Position dated 29 March 2018.


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Last modification   29.03.2018