The National Bank of Ukraine has overhauled the Classifier of Foreign Currencies and Banking Metals, which was last amended in 2015.  On 19 April 2016, the NBU Board issued Resolution No 269 On Amendments to the Classifier of Foreign Currencies and Banking Metals was issued to this effect.

Under the current version of the Classifier of Foreign Currencies and Banking Metals, foreign currencies fall into three groups:

 -the 1st Group: hard currencies that are widely used for settling international transactions, freely traded in the  main global foreign exchange markets and qualify as  eligible assets for investment purposes;

 -the 2nd Group: hard currencies that are limited in terms of international usage and are not widely accepted as a medium for settling international transactions. These currencies are not freely traded in the  main global foreign exchange markets;

-the 3rd Group: soft currencies.

The upgraded Classifier has retained the three groups of currencies but has sharpened the criteria for the inclusion of currencies into the first Group. Additionally, the Classifier provides an exhaustive list of currencies included into each group.

Up until now, the 1st Group included 11 currencies, Special Drawing Rights (SDR) and four banking metals (gold, silver, platinum and palladium).   The NBU has expanded the list of currencies listed in the 1st Group by adding  currencies of the countries  that are not euro area members. These currencies include the Bulgarian lev (BGN), Polish Zloty (PLN), Romanian leu (RON), Croatian kuna (HRK), Czech koruna (CZK) and the Hungarian forint (HUF). The Chinese currency renminbi (RMB), which is to be included in the basket of currencies which make up the IMF’s Special Drawing Right, effective 1 October  2016, has also been included in the 1st Group. Additionally, the 1st Group has been expanded to include currencies that are actively traded in global foreign exchange markets, which were earlier included in other groups. These currencies include the South Korean won (KRW), Hong Kong dollar (HKD), Mexican peso (MXN), New Israeli Shekel (ILS), and Singapore dollar (SGD).   Instead, the Icelandic Krona (ISK) has been excluded from the 1st Group and included in the 2nd Group.  All in all, the 1st Group will include 24 foreign currencies, SDR and four banking metals.    

With the inclusion of these currencies in the 1st Group, the  rules governing investments into Ukraine and the repatriation of returns on investments have been extended to apply to these foreign currencies.  As only foreign currencies listed in the 1st Group of the Classifier shall qualify as eligible assets for investment purposes, the expansion of the list of foreign currencies included in the 1st Group will make it easier for countries where these currencies are used as a medium of exchange, including EU countries, to make investments into Ukraine's economy.

Once the Chinese currency renminbi (RMB) is  included in the basket of currencies which make up the IMF’s SDR, the NBU will add this currency to the list of reserve currencies in which Ukraine’s international reserves are held.

The expansion of the list of foreign currencies included in   the 1st Group will expand the opportunities for foreign exchange cash transactions and foreign exchange interbank transactions. At the same time, surrender requirements for export proceeds shall apply to the foreign currencies listed in the 1st Group of the overhauled Classifier. This move will have a limited impact on businesses transactions as at the beginning of 2016 export proceeds denominated in US dollars and euros account for 93% of total export proceeds. Foreign currencies, which will be included in the 1st Group of the overhauled Classifier, account for only 0.03% of total export proceeds.

The amendments shall take effect from 4 May 2016.