The National Bank of Ukraine moves ahead with efforts to gradually ease administrative restrictions while keeping in place key measures needed to ensure the country’s banking and financial stability, reads  NBU Board Resolution No. 863, dated 4 December 2015,  On Resolving the Situation in the Money and Foreign Exchange Markets of Ukraine.

The resolution aims to maintain the positive developments seen in the money and FX markets and prevent capital outflows from the country. Therefore, the NBU keeps in place the surrender requirement obliging legal entities to surrender (sell) 75% of their export proceeds and the 90-day rule for settlements for export/import of goods, and extends a ban on early repayment of loans by resident borrowers under foreign currency loan agreements between a resident borrower and a non-resident lender.

At the same time, in response to requests by banks and businesses, the NBU pushes ahead with efforts gradually relaxing administrative restrictions. Henceforth, a 75% mandatory surrender requirement shall not apply to loans granted to a resident borrower under loan agreements involving a foreign export-and-import agency to fulfill its obligations under an import contract. The waiver applies only to cases where a foreign lender transfers funds under an import contract with a borrower directly to the non-resident exporter’s accounts, i.e., without these funds having been credited to the resident borrower's accounts. The surrender requirement shall no longer apply to a cash security deposit (guarantee contribution, collateral, earnest money deposit, deposit) pledged by a non-resident to participate in the public procurement bidding process. The move aims to facilitate non-residents’ access to public procurements.

Additionally, banks earlier were allowed not to surrender the proceeds returned upon the initiative of a foreign bank within a 2-day period after the transfer date. The new resolution extended this period from two to seven days.

At the request of banks and the Ukrainian Interbank Association of Payment System Members, the NBU has relaxed the rules governing overseas e-payments by individuals.

Up until now, there has been and remains in effect the provision allowing transfers of up to an equivalent of UAH 150,000 from current accounts in foreign currency. However, henceforth, this limitation shall not apply to non-cash payments to settle bills for goods and services goods intended for personal consumption.

To support the activities of the Mission of the International Committee of the Red Cross (ICRC) in Ukraine, the regulator granted a waiver of the restriction on cash withdrawals through cashier’s offices. Cash withdrawals are currently limited to UAH 300,000 per day per customer. Under this resolution, operations performed by the ICRC shall be exempt from the restriction.  

The regulator relaxed a ban on purchases of foreign currency by a foreign investor using funds received as proceeds from the sale of securities floated by Ukrainian issuers. Henceforth, this ban shall not apply to the funds received as proceeds from the sale of Ukrainian government bonds, both on the exchange and over-the-counter markets.

Additionally, the resolution aims to tighten financial discipline among banks and their customers.

The first requirement relates to the right to purchase foreign currency at the instruction of a resident client with FX holdings on current and deposit accounts with banks. Until now, an authorized bank was not allowed to purchase foreign currency at the instruction of a resident client (except for individuals) with FX holdings on current and deposit accounts with banks.  Henceforth, a bank shall not be allowed to purchase foreign currency for clients with holdings on the “Funds in settlements of business entities” (balance sheet account 2602). This shall apply to the funds that are recorded as cash security (coverage) in foreign currency under guarantees, counter-guarantees, or the stand-by letter of credit in this and/or other authorized banks. A bank is allowed to purchase foreign currency for resident clients with FX holdings on current and deposit accounts only if the total FX amount held in both accounts plus the 2602 balance sheet account is less than USD 25,000. This move aims to encourage banks to use their own funds in foreign currency to fulfill their obligations in foreign exchanges.

Another provision set out in the resolution grants the NBU the option not to approve foreign currency purchases and transfers if there is evidence that the bank performs risky activities or if the regulator has concluded that the nature or potential consequences of financial operations suggest that the bank is used for the purposes of money laundering  [legalization (laundering) of the proceeds from crime] or terrorist financing, as well as financing of the proliferation of weapons of mass destruction.

These amendments shall come into effect from 5 December 2015 and will remain in effect until 4 March 2016. However,  regardless of the validity period of the resolutions, the NBU is set to push ahead with FX liberalization measures in a gradual manner should FX market conditions and the overall economic situation in Ukraine remain favorable.