Given the current state of the domestic economy and the importance of preserving positive developments in the foreign exchange market, the National Bank of Ukraine has adopted a decision to extend for three months a set of administrative instruments regulating the foreign exchange market. To this end, the regulator has approved NBU Board Resolution No 160, dated March 3, 2015 On Resolving the Situation in the Monetary and Foreign Exchange Markets of Ukraine (hereinafter – Resolution No 160).
The provisions of Resolution No 160 retain the requirement for the mandatory sale of 75% of proceeds in foreign currency and the 90-day rule for settlements for export/import of goods.
In addition, with a view to keeping the market on the right track toward achieving stabilization, Resolution No 160 has introduced ad hoc administrative measures governing the execution of foreign exchange operations by banks. These measures shall apply mainly to legal entities. The administrative restrictions that apply to individuals will remain all but unchanged.
Resolution No 160, inter alia, has imposed restrictions on the purchase of non-cash foreign exchange and banking metals for hryvnias under the banks' transactions for their own benefit within a business day. This requirement shall apply to the “tod”, “tom”, “spot”, and “forward” foreign exchange transactions. The above requirement shall not apply to the foreign currency swap transactions.
The banks shall be prohibited to extend loans in domestic currency to the customers (including under the opened credit lines and through rollover of previously extended loans), if the property rights for the fx held in the accounts with the banks are pledged as collateral against such loans.
Resolution No 160 bans banks from purchasing foreign exchange at the instruction of a resident client (except for individuals) with fx holdings on current and deposit accounts with banks, if the total fx amount held in client's accounts with the banks exceeds USD 10,000 (in equivalent at the official rates of corresponding currencies on the day of the fx purchase application). However, funds on account(s) with the bank declared insolvent, which is placed under a provisional administration or liquidation, funds on client's accounts, property rights for which are pledged as collateral under a collateral agreement, and funds placed on deposit accounts before enactment of this Resolution shall not be included into the total fx amount held on the client's accounts with authorized banks.
In order to prevent corrupt practices pertaining to the execution of foreign exchange operations by banks, the list of documents justifying foreign exchange purchase transactions and the transfer of foreign exchange outside Ukraine to be submitted for import operations has been expanded to include a reference from the State Fiscal Service of Ukraine certifying that the client has no outstanding debts on taxes, levies and payments.
Resolution No 160 has imposed restrictions on banks' operations to sell banking metals for non-cash hryvnia to economic entities, if the total weight per one calendar week per banking institution per client exceeds 3.216 gold troy ounce (an equivalent in other banking metals calculated at the cross rate according to official investment metals rates set by the National Bank of Ukraine). This requirement shall not apply to interbank transactions and sale by authorized banks of banking metals to enable their clients to fulfil their obligations in banking metals under the loan agreements.
Therefore, the measures taken by the National Bank will help further stabilize the foreign exchange market by ensuring regular inflows of foreign currency into it and prevent capital flight outside Ukraine.
Resolution No 160 enters into force on March 4, 2015 and remains in effect until June 3, 2015, inclusive.
In addition, the Board of the National bank of Ukraine passed NBU Board Resolution No 161, dated March 3, 2015, On Amendments to Some NBU Regulations (hereinafter – resolution No 161) amending NBU Board Resolution No 124, dated February 23, 2015 On Details of Some Foreign Exchange Transactions (hereinafter – Resolution No 124).
The amended Resolution has established that the requirement set forth in Resolution No 124 obliging banks to use the letter of credit payment method to execute settlements under import contracts with the total amount exceeding USD 500,000 for the period until April 3, 2015 shall not apply to import operations involving the purchase of vital goods (life-sustaining goods).
Resolution No 161 is designed to ensure stable import of life-sustaining goods needed for the economy and citizens, such as oil, gas, fuel for NPS, electricity, coal, petrol, diesel fuel, pharmaceuticals for haemodialysis and oncology treatment, international humanitarian aid, and military defence products.
Goods determined by Article 5 of the Law of Ukraine On Measures to Stabilize the Balance of Payments of Ukraine in accordance with Article XII of the General Agreement on Tariffs and Trade 1994.