Yes, they can. However, the sum of a transaction based on one international business contract shall not exceed UAH 150,000 per one operational day. 

Justification

Legal entities are prohibited from performing settlements under international business contracts using e-payment means, except for settlements in low-value thresholds (up to UAH 150,000 in the equivalent) based on one international business contract per one business day in accordance with Section X, paragraph 109 of Regulation No. 5.

Yes, it can. The individual can transfer funds in foreign currency to another individual in Ukraine, if this individual is his/her relative.

Justification

An individual (resident or nonresident) can remit foreign currency from his/her own current account to another individual’s account within Ukraine in accordance with Section X, paragraphs 118, 119 of Regulation No. 5. The indicated transactions are allowed exclusively on the conditions that the receipts/transfers of funds to/from accounts are made to/from relatives.

Relatives are considered to be father, mother, stepfather, stepmother, son, daughter, stepson, stepdaughter, grandmother, grandfather, great-grandmother, great-grandfather, grandchildren, great-grandchildren, sibling (by blood and by law), cousins, aunt, uncle, niece, nephew, adopter, adoptee, guardian, person under guardianship or care, or spouse (paragraph 2, subparagraph 10, Regulation No. 5).

No. A resident sole proprietor can sell his/her foreign currency for hryvnias from his/her current account and, after paying taxes and fees, can transfer these funds to his/her personal current account.

Justification

In accordance with paragraph 113, Section X of Regulation No. 5, funds deposited in foreign currency to the current account of a resident sole proprietor, opened for a business entity, and the transferring of such funds from this account shall be done under the terms of the current account in the foreign currency of resident legal entity, as noted in Section X, paragraphs 109 and 110 of Regulation No. 5. 

The transfers of foreign currency from the current account of a resident sole proprietor to his/her personal foreign currency current account shall be prohibited.

Yes, the bank is required sell such funds.

Justification

Pursuant to Section IV, paragraphs 44 and 45 of Regulation No. 5, a resident client shall use foreign currency, which had been bought and accrued on his/her current account for regular repayment of a certain purpose, to a non-resident under a loan/borrowings/reimbursable financial assistance agreement, not later than ten business days after the date of such regular payment.   

In line with Section IV, paragraph 47 of Regulation No. 5, the bank is required to sell the purchased foreign currency within five business days if a resident client violates intentionally the ten-day term for the use of this currency.

Yes, he/she can. NBU regulations do not prohibit legal entities and individual sole proprietors from buying foreign currency in order to make advance payments (pre-payment) for the import of goods under international business contracts.

Justification

Section V, paragraph 54 of Regulation No. 5 defines the peculiarities of conducting only certain foreign currency purchases with the goal of conducting settlements by legal entities and sole proprietor individuals with non-residents for the import of goods supplied to Ukraine.

Yes, he/she can. The bank can remove currency supervision from transactions if the sum of each such transaction does not exceed the small-value threshold.   

Justification

Pursuant to paragraph 3 of NBU Resolution No. 7 dated 2 January 2019, the banks shall exercise currency supervision of residents’ compliance with settlement deadlines in goods export and import transactions not settled before 7 February 2019, as specified in Section II, paragraph 21 of Regulation No. 5, in line with Instruction No. 7.  

The bank shall terminate currency supervision of residents’ compliance with settlement deadlines if the sum of unsettled export and import transactions does not exceed the small-value threshold, as set out in Section III, paragraph 9, subparagraph 1 of Instruction No. 7  

Currently, there are restrictions per one calendar day on the purchase of foreign currency and investment metals by individuals.     However, such restrictions should be divided between cash and non-cash transactions. An individual can purchase online both non-cash foreign currency up to UAH 150,000 in the equivalent and investment metals without physical delivery up to UAH 150,000 in the equivalent, at one bank within one calendar day. On that same day, the individual can purchase foreign currency cash or investment metals with physical delivery up to UAH 150,000 in the equivalent. 

Justification

Banks are prohibited to sell investment metals without physical delivery for non-cash UAH to its individual-clients in excess of the low-value threshold (UAH 150,000 in the equivalent) per one client, at one bank, within one calendar day pursuant to Section IV, paragraph 35, subparagraph 2 of Regulation No. 5.

Bank clients individuals may conduct small-value transactions to purchase non-cash foreign currency without any justification/obligations (one individual within one calendar day at one bank) in accordance with Section V, paragraph 58 of Regulation No. 5.

At the same time, authorized institutions are prohibited to conduct transactions to sell foreign cash or investment metals with physical delivery to one individual within one business day at one bank/financial institution, except for low-value transactions in accordance with Section IV, paragraph 39 of Regulation No. 5.

Individual non-residents, who are registered under Ukrainian legislation as sole proprietors, can use the current accounts of resident legal entities (individual sole proprietors) to conduct transactions in foreign currency/hryvnia in their entrepreneurial activity, and they can use the current accounts of non-resident individuals for personal purposes.  

Justification

Pursuant to Article 55 part two, paragraph 2 of the Economic Code of Ukraine, Ukrainian citizens, foreigners and individuals without citizenship – who are engaged in economic activity and registered as sole proprietors under the law – are deemed to be legal entities.  

In particular, residents are individual sole proprietors who are registered in accordance with the laws of Ukraine pursuant to Article 1, part one, paragraph 9, subparagraph 6 of the Law of Ukraine, On Currency and Currency Operations.

The terms, procedures and pecularities of transactions involving the current accounts of bank clients is specified in Section X of Regulation No. 5.

Yes, it can. The bank can cease currency supervision of transactions if the sum of each such transaction does not exceed the small-value threshold.

Justification

Pursuant to paragraph 3 of NBU Resolution No. 7 dated 2 January 2019, the banks shall exercise currency supervision of residents’ compliance with settlement deadlines in goods export and import transactions not settled before 7 February 2019, as specified in Section II, paragraph 21 of Regulation No. 5, in line with Instruction No. 7.

The bank shall terminate currency supervision of residents’ compliance with settlement deadlines if the sum of unsettled export and import transactions does not exceed the small-value threshold, as set out in Section III, paragraph 9, subparagraph 1 of Instruction No. 7.

The bank-factor can complete currency supervision of a resident’s export transaction after the receipt of funds from the non-resident debtor to the account of the bank-factor subject to the availability of all documents related to the export transaction.  

Justification

The bank shall complete the currency supervision of residents’ compliance with settlement deadlines in the event of the lender’s substitution in liability to the goods export transaction – after payments made to the resident’s current account – of the new lender’s funds in the bank received from the non-resident debtor for the goods supplied by the resident-original lender, and subject to the availability of documents on the change of lender in liability to the export transaction pursuant to Instruction No. 7, Section III, paragraph 9, subparagraph 6.

No (except for certain cases).

Justification

If the NBU imposes a safeguard in the form of an obligatory sale of a part of proceeds in foreign currency, the bank shall not have the right to complete currency supervision of compliance by the resident with settlement deadlines in a goods export transaction based on documents of terminating liabilities by offsetting, except for the cases set out in Section III, paragraph 10, subparagraph 5 of Instruction No. 7.

Yes, there are certain peculiarities. The bank should analyze documents for compliance with laws when a resident transfers funds to the account of a foreign broker-intermediary. Specifically, the bank shall check the investor’s source of funds and whether there are any prohibitions for such currency transactions under Ukrainian law.    The bank shall decide independently on the need to submit documents related to the currency transaction by the client. One such document can be the intermediary agreement between the resident and the foreign broker, whose conditions the NBU recommends analyzing.

Justification

Pursuant to Regulation No. 2, the bank shall decide independently on the client’s need to submit certain documents related to such currency transactions. The bank shall analyze the client’s documents/information for the availability/absence of prohibitions for the respective currency transactions, according to the laws of Ukraine, including certain foreign jurisdictions stipulated in Section I, paragraphs 143 and 144 of Regulation No. 5. 

If the intermediary agreement (application for the purchase of foreign currency, payment order) includes information that the investment instrument and/or non-resident seller is registered/located/resides in the countries (territories) noted in Section I, paragraphs 143 and 144 of Regulation No. 5, the bank shall reject such currency transactions. 

The bank shall apply a risk-based approach to intermediary agreements – on the date which, as a rule, the investment instrument and/or non-resident seller are unknown – that involves: 

assessing the risks as to whether the foreign broker under the intermediary agreement has a license for the respective activity in the country of his/her registration/location 

becoming assured that the intermediary agreement does not have obvious signs of a currency transaction that can be tied to the evasion and/or non-compliance with the requirements and restrictions set by the laws of Ukraine.     Otherwise, the bank shall demand additional documents from the resident according to Regulation No. 8 and make a final decision on the transaction based on the results of this analysis.

Yes, he/she can. Such transfers shall be made within the e-limit noted in Regulation No. 5. At present, the limit is EUR 50,000 per year.

Justification

Investments abroad are currency transactions that involve residents investing currency into investment instruments abroad with the goal of gaining profit or achieving social status, according to Section I, paragraph 2, subparagraph 5 of Regulation No. 5. One way a resident makes investments abroad is with the purchase of real estate, particularly an apartment.  Such an operation shall occur in adherence to the e-limit determined in Section IX, paragraph 88 of Regulation No. 5.

Yes, except for cases when such purchases are directly prohibited by NBU regulations.

Justification

In accordance with Section IX, paragraph 87 of Regulation No. 5, residents shall purchase foreign currency/transfer foreign currency/hryvnia abroad/to the current account of a non-resident legal entity opened in Ukraine (except for investment accounts) within the limits stipulated in Section ІХ, paragraphs 88, 89, 91 and 93 hereof.

In accordance with Section IX, paragraph 89 of Regulation No. 5, residents (legal entities/sole proprietors) are allowed to conduct foreign transfers from Ukraine in their economic activity, and transfers to the current accounts of non-residents legal entities opened in Ukraine (except for investment accounts). Such transactions are allowed during a calendar year, within a total amount that cannot exceed EUR 2 million (the equivalent of this amount in another foreign currency/hryvnia based on the official exchange rate of the hryvnia to foreign currencies set by the NBU on the date of the corresponding transaction).

Hence, legal entities/individual sole proprietors can purchase foreign currency to conduct foreign currency transactions within the limit stipulated by Section IX, paragraph 89 of Regulation No. 5, including the restrictions set out in Regulation No. 5.

In particular, banks shall be prohibited from purchasing non-cash foreign currency upon the instruction/application of resident clients for the purpose of depositing funds at a bank and/or in the account opened abroad with a foreign financial institution (Section I, paragraph 141, Regulation No. 5).

The full list of cases, which do not fall under the indicated restriction, is provided in Section I, paragraph 142, Regulation No. 5.   Specifically, this restriction does not cover legal entities/individual sole proprietors purchasing foreign currency in order to deposit the funds into their own accounts abroad in order to maintain their own standalone subunits abroad and/or to fulfil obligations under international business contracts (except for obligations to transfer the amounts of deposits to accounts at foreign financial institutions).

Yes, they are permitted.

Justification

The list of documents, which are the basis for returning foreign investment and proceeds, profit and other funds received from investment instruments in Ukraine, is stipulated in Section VI, paragraph 71 of Regulation No. 5.

Specifically, according to Section VI, paragraph 71, subparagraph 6, indent 2 of Regulation No. 5, the documents confirming foreign investments (foreign investment agreements, agreements on joint investment activity without the establishment of a legal entity, documents confirming the rights of a foreign investor to the investment instrument, statements of resident banks on foreign investors' foreign investments in foreign currency/hryvnia, customs declarations on the import into Ukraine of goods for the purpose of investment and/or other documents confirming foreign investments in accordance with Ukrainian legislation) shall be submitted to the bank.

It is enough to submit documents supporting the rights of foreign investors to an investment instrument to comply with the requirements of Section VI, paragraph 71, subparagraph 6, indent 2 of Regulation No. 5. if the period between the date of the foreign investor acquiring the ownership rights to the investment instrument – and the date of the foreign exchange transaction on repayment to the foreign investor of foreign investment and revenue, profit, and other returns on investment instruments received in Ukraine – exceeds five calendar years. Thus, under such conditions, the documents on making foreign investment shall not be submitted. In this case, confirmation on acquiring the ownership of an investment instrument by a foreign investor shall be sufficient. 

In accordance with the Section VI, paragraph 71, subparagraph 6, indent 4 of Regulation No. 5, the agreement on the transfer of foreign investment instruments between non-residents, which provides for settlements outside Ukraine, with documentary evidence of its execution (filed subject to the acquisition of ownership rights to the investment instrument in the specified manner) shall be submitted to the bank.  In this case, the documents filed in compliance with Section VI, paragraph 71, subparagraph 6, indent 2, of this Regulation shall confirm the previously made foreign investment in Ukraine in the investment instrument by its previous non-resident owner. The bank should also consider the exceptions mentioned above regarding submitting documents provided by Section VI, paragraph 71, subparagraph 6, indent 2 of Regulation No. 5.

In addition, banks should comply with Regulation No. 8 in such transactions.

Yes, he/she can. Such transactions shall be made within the e-limit (EUR 50,000 per calendar year) and in consideration of restrictions to investing in certain foreign countries noted in Resolution No. 5 (offshore jurisdictions, aggressor states/occupiers, states failing to comply with Financial Action Task Force (FATF) recommendations, etc.).   

Justification

NBU regulatory documents do not restrict a resident’s right to choose how he/she is going to invest abroad.   For instance, he/she can transfer funds directly to the account of a seller of a foreign investment instrument, or refer services provided by a professional intermediary, such as a foreign broker, which is standard global practice.     In the prior case, the funds will be transferred to the bank account of the foreign broker.

Such transactions shall be made during the entire calendar year for a total sum not exceeding EUR 50,000 inclusive (Regulation No. 5, Section IX, paragraph 88).

It should be also mentioned that in accordance with Section I, paragraph 144 of Regulation No. 5, foreign investment transactions are prohibited if the investment instrument and/or non-resident seller is registered (located, resides) in the country (on the territory) that:

• is included in the Cabinet of Ministers of Ukraine’s list of offshore zones
• recognized by the Verkhovna Rada of Ukraine as an aggressor state/occupier (e.g. the Russian Federation is such a state)
• does not implement or poorly implements the recommendations of international organizations and intergovernmental organizations that conduct activities in the sphere of fighting against money laundering, terrorist financing (AML/CFT) or the financing of distributing weapons of mass destruction
• has strategical deficiencies in AML/CFT according to the statements of the Financial Action Task Force (FATF). 

Yes, they can.

Justification

The resident and his/her servicing bank shall follow Section IX (that relates to the limits set for the relevant transactions) and Section X (terms, procedure and peculiarities for transactions involving the current accounts of bank clients) of Regulation No. 5 when giving loan/reimbursable financial assistance in foreign currency to non-residents (including purchases of foreign currency).

No. The NBU does not set numerical values for maximum interest rates thst restrict the total value of loans/borrowings received by residents from non-residents.

At the same time, in determining a loan’s terms with non-residents and conducting currency transactions under these agreements, residents should consider that Ukrainian laws oblige banks to detect questionable currency transactions, particularly when establishing inconsistencies between the value of an external loan based on certain agreements and market conditions.

Justification

Pursuant to paragraph 8 of Regulation No. 8 authorized institution shall additionally analyze documents (information) about currency transactions when setting indicators, as noted in the Annex to Regulation No. 8, in order to confirm or reject a currency transaction as questionable.   

The list of such indicators includes, in particular, Indicator No. 24 relating to currency transactions under a loan/borrowing agreement, concluded by a resident borrower with non-residents, as to which a bank may have doubts based on the non-compliance of the value of a foreign loan with market conditions.  

For more details on assessing the value of external loans secured under a loan agreement in comparison with market conditions, we suggest reviewing the NBU recommendations provided to banks in Letter No. Р/25-0006/2831 dated 17 January 2019.

Yes, it is.

Justification

The resident and his/her servicing bank shall follow Section IX (that relates to the limits set for the relevant transactions) and Section X (terms, procedure and peculiarities for transactions involving the current accounts of bank clients) of Regulation No. 5 when giving loan/reimbursable financial assistance in foreign currency to non-residents (including purchases of foreign currency).

No. This issue is in the sphere of contractual relations between a client and his/her bank.

Justification

NBU regulations, which are the basis for the new system of currency regulations, do not require banks to translate documents related to currency transactions into the Ukrainian language, and do not require certifying such translations with a notary. 

In Ukraine, commissions are paid in hryvnia in accordance with the law. However, not all payments relate to commission payments. The essence of transfers and contractual terms shall be the basis of decisions to qualify such payments as commissions on the territory of Ukraine.    

Justification

Pursuant to Article 5, part two of the Law of Ukraine On Currency and Currency Operations all payments in Ukraine shall be made in hryvnias except for transactions stipulated in subparagraphs 1-6 of part two hereof. 

In accordance with Article 5, part three hereof, the payment of fees and commissions – and other payments related to the transactions specified in part two paragraphs 1-6 of this article – are made solely in hryvnias, apart from the payment of loans or deposit interest, which can be done in foreign currency, investment metals or in hryvnias.

No. The last period that required submitting such declarations was Q4 2018.

Justification

The Cabinet of Ministers Decree No. 15-93 On the System of Currency Regulation and Control dated 19 February 1993, and Presidential Decree No. 319 On Urgent Measures on the Retrieval to Ukraine of Currency Valuables Illegally Held Abroad dated 18 June 1994, have been declared null and void pursuant to Article 16 of the Law of Ukraine On Currency and Currency Operations.    

Residents of Ukraine shall not declare currency valuables and other property belonging to them and located outside Ukraine pursuant to the Law of Ukraine, On Currency and Currency Operations.  

Considering the above mentioned, Ukraine’s sole proprietors are not required to submit declarations of currency valuables, income and property belonging to residents of Ukraine, and that are located outside Ukraine, for reporting periods starting Q1 2019.

The last period requiring such declarations was Q4 2018.

National Bank regulations do not require presenting passports during such transactions. At the same time, the bank shall determine independently its system of monitoring its clients’ transactions and can demand passports being presented in order to adhere to limits on the sale of foreign currency.

Justification

Authorized institutions are not allowed to sell cash in foreign currency or investment metals with the physical delivery to one individual per one business day within the bounds of one bank/financial institution, except for low-value transactions (up to UAH 150,000 in the equivalent) pursuant to Section IV, paragraph 39 of Regulation No. 5.

- In Ukrainian currency (the hryvnia, UAH) or foreign currency (Group 1 and Group 2 of the NBU’s currency Classifier);

- Investment can be made in:

• shares
• bonds
• other securities
• equity rights
• any kind of movable property
• real estate and related property rights, etc.

• To create an enterprise, which is 100% owned by foreign investor, to open a branch or purchase the whole enterprise/company/firm
• To purchase a share of already operating enterprise
• To purchase real estate/movable property – houses, flats, premises, equipment, transport etc. by obtaining it directly or in form of shares, bonds and other securities
• To hold a business (entrepreneurship) activity on product distribution agreements etc.

1. You can transfer funds (foreign currency or UAH) from abroad on your own account with local bank:

• Current account
• Investment account
• Escrow account
• Correspondent account.

The foreign currency on investors’ accounts can be exchanged into UAH without any limits and vice versa, UAH can be freely exchanged to foreign currency and transferred abroad.

2. Funds from abroad can be transferred directly on resident’s account in Ukraine. This resident can be a seller of the investment object, same as intermediary (f. e. securities trader)
3. The payments on the territory of Ukraine can be done in UAH/foreign currency from own accounts with other investors or residents, including nominee (omnibus) accounts in Ukraine
4. Payments also can be done via foreign custodian bank’s correspondent account, which has a securities account at the National Bank of Ukraine  (payments should be done on trading ukrainian government bonds only)
5. The own escrow account also can be used for purchasing ukrainian issuers’ shares by «squeeze-out» procedure
6. Funds can be transferred from one own account to another, opened in a local banks, without any limitations;

The foreign investor can freely hold funds on deposits in UAH/foreign currency in local banks.

1. Funds from investments (sale, reducing share in capital, incomes/dividends) can be obtained on accounts (current/investment/investor’s correspondent accounts), opened in a local banks. These funds can be then transferred to accounts abroad
2. These funds also can be obtained on accounts abroad directly without transition through accounts in local banks.

Payments on such transactions, including cross-border transactions, can be done freely in:

1. UAH
2. Foreign currency (1^st and 2^nd groups of the NBU’s Currency Classifier).

Such transactions can be done without any limitations in volumes and with proper documentation for financial monitoring purposes, provided to servicing bank. For example:

• on dividends repatriation the servicing bank should have documentation, proving foreign investor’s property on corporate rights/investment certificates of ukrainian issuer, which dividends are payed on and issuer’s decision on dividends payment to foreign investor;
• on selling local government bonds by foreign investor, providing an agreement on selling government bonds by foreign investor and an account statement (issued by custodian, which proves investor’s property rights on government bonds on the date of transaction or which holds all information about transaction’s performance) is enough to proceed;

For information:  until recently Ukraine had a temporary set of safeguard measures, which contained limits on dividends and proceeds from selling securities, corporate rights etc. repatriation. As of now, these limits are cancelled completely for foreign investors.

Today there are three financial regulators: the NBU, the National Securities and Stock Market Commission (NSSMC), and the National Commission for State Regulation of Financial Services Markets (NFSC). After the split has been implemented, there will be two regulators left: the NBU, and the NSSMC. They will operate more effectively.

The NBU will regulate insurance companies, leasing companies, factoring companies, credit unions, pawnshops, and other financial institutions. Private pension funds, pension fund administrators, and construction financing funds will be regulated and supervised by the NSSMC.

The split will ensure transparency, reliability, and efficiency of the nonbank and financial market. Financial markets are communicating vessels. We have made one part of the financial market – the banking sector – transparent and stable. But the other part remains obscure. At this time, we can guarantee neither financial stability, nor improvement in the investment allure of the financial sector as a whole, nor protection of consumer rights.

The split will ensure the safety of Ukrainians as consumers of financial services. After all, the split will establish clear requirements for nonbank financial institutions, and build systematic control over their compliance with these requirements. Eventually, we will be able to prevent the emergence of financial pyramids or fraudulent schemes such as Bank Mykhailivskyi by ensuring there is a fully transparent and sound financial sector.

The consolidated model of supervision of the nonbank financial market with only two regulators, the NBU and the NSSMC, is precisely the type of model that will complete the financial sector reform that started in 2014 after the Revolution of Dignity.

After the split has been implemented, the market will be offered a more effective regulation approach without excessive control from the regulator. Requirements for financial institutions will depend on the risk to consumers and the company’s impact on the market. For instance, if the company does not raise funds from customers, then its activities are less risky, and so it should have to meet fewer requirements, and the requirements themselves should be simpler.

At the same time, each company in the market will have to meet three basic requirements: availability and adequacy of equity, transparent ownership structure, and compliance with financial monitoring laws. This will ensure there is a level playing field for companies to operate. In addition, this will gradually revitalize the market, as these requirements will prevent the use of nonbank financial institutions in various schemes, such as tax evasion.

We will do nothing that may rattle the nonbank financial market. In other words, no radical changes will take place, either tomorrow or the day after or in a few months, for that matter. The law on split stipulates a transition period that will last until 1 July 2020. During the transition, the current regulation will be in force, and the NFSC will operate at its full capacity. This means that the NFSC will continue to regulate the market up until and including 30 June, and the NBU will take over this function starting 1 July 2020.

Our focus during the transition will be to analyze the nonbank financial market from top to bottom. The NBU will draw up new sector-specific regulations and requirements that will take into account the results of this analysis. As it does so, the NBU will maintain an intensive dialogue with the market.

During the transition period, the NBU will take inventory of the laws that govern each sector. This work will start within a month of the law’s adoption. Based on the review of the legislation, the NBU plans to prepare White Papers with detailed proposals on the regulation of certain segments of the nonbank financial market. These documents will be widely discussed by financial institutions, experts, and other stakeholders (consumers, creditors, and financial service investors).

During the transition, the NBU and NFSC will prepare for the handover of responsibilities. We will hold competitions for new positions in the relevant structural units that will be created or supplemented by new specialists to work with nonbank financial markets; we will receive from the NFSC all documents, archives, and reporting; we will engage market representatives in the conduct of test submissions of reporting to the NBU; etc.

During the transition, we will create the necessary structural units at the NBU. Professionals will be recruited to these units on the basis of open competitions, which means that the NFSC staff will be invited to participate in the selection.

Furthermore, their experience and knowledge of the market will obviously be a competitive advantage that will be taken into account in case they score the same points as other candidates. This, however, will by no means diminish our determination to ensure equal opportunities for everyone who seeks employment with the NBU.

The NBU’s new powers will logically supplement the functions that are already in operation. In the main, this means that the NBU will create a single center of responsibility for the stability of the financial system.

We already have effective and time-tested mechanisms and procedures, which we use when supervising banks. The NBU uses these mechanisms and procedures in supervising the transfers of funds and currency transactions conducted by nonbank financial institutions.

By law, the NBU is institutionally independent, meaning that we don’t have to have our regulations approved by the State Regulatory Authority or registered by the Ministry of Justice of Ukraine. The moratorium on inspections, which has been in force in the nonbank financial market for nearly two years now, does not apply to the NBU either. This will enable us to be more flexible when supervising the market and to respond to negative signals adequately and on time.

Existing units and functions will be distributed among blocs of units that report to NBU First Deputy Governor Kateryna Rozhkova and NBU Deputy Governor Dmytro Sologub.

We have no intention of performing any market cleanups. We openly declare the approaches that we are going to take and the requirements that all institutions must meet. That includes the availability and adequacy of equity, a transparent ownership structure, and compliance with financial monitoring regulations.  It therefore is up to the companies themselves to meet the new requirements and ratios.

The NBU has always taken a partnership approach to market players. We will discuss all ratio requirements with the market.  This is the approach we took last year as we prepared our draft White Paper on the regulation of the nonbank financial market.

At the same time, we are bound by the commitments we made under the EU–Ukraine Association Agreement. We took it upon ourselves to align the NBU’s regulation of this area with EU standards. This will, first and foremost, give our citizens greater protection and confidence that their rights will not be violated and that the services they pay for will be provided by companies.

No such list exists. Nor is there any target as to the number of companies to be liquidated. We will be happy if all companies operating in the market today meet the new requirements. The requirements are, after all, quite simple.

The NBU sets three basic requirements for any company in the financial market. That includes the availability and adequacy of equity, a transparent ownership structure, and compliance with financial monitoring regulations. These are key requirements in the banking market as well. Failure to meet them was the main reason banks were resolved en masse in 2014–2017.

As for ownership structure, even now financial institutions are required to make sure the NFSC approves the qualifying shareholder, i.e. the entity that buys a stake of at least 10%. Yet the NBU has more ownership structure requirements. One of them is that financial institutions must not be owned by trusts for which it is impossible to identify their real owners or nominal owners that obscure the real beneficiaries.

We intend to make these requirements universal for the entire financial market, as they ensure that financial institutions are transparent and reliable and that consumers are safe and confident.

The NBU proposes to regroup the companies that operate in the nonbank financial market. Doing so will streamline the market and give market players a clear understanding of what requirements they need to meet and what development opportunities they have.

The NBU offers to regroup nonbank financial companies as follows:

• Group one: credit institutions that are eligible to make loans, including at the expense of funds borrowed from the public.
• Group two: insurance companies, which also work with funds they draw in from Ukrainians, and insurance intermediaries.
• Group three: companies that do not use borrowed money to provide financial services.

The NBU will exercise tighter control over the companies in the first two groups, as their activities are more risky: they operate on funds they raise from households and entrepreneurs. The companies in groups one and two will receive the full scope of prudential supervision. However, control will vary depending on the company’s market share, business model, and a number of other criteria. The greater the company’s market share, the stronger the company’s impact on the market. Companies with large market shares will have to meet more requirements.

This approach will ease the burden of supervision on small- and middle-sized businesses.

The basis of our supervision – of both the banking and, from now on, nonbank markets – is a risk-based approach to regulation and supervision.

The NBU operates a system of risk-based banking supervision. It enables us to use human and financial resources more effectively. The NBU is constantly improving its approaches to offsite and onsite banking supervision, and early intervention mechanisms to maintain the solvency of banks. We will use this experience for nonbank financial institutions as well.

The introduction of risk-based prudential supervision, first and foremost in the insurance and nonbank lending sectors, is a time-consuming task. This supervision should ensure the resilience of individual market participants and protect the financial system from shocks.

Present-day practices also require a transition to a risk-based model of corporate governance in the nonbank financial sector that would be focused on identifying, monitoring, controlling, and managing risks.

This corporate governance model will seek to increase the confidence of financial institutions’ clients in individual market participants and in the financial system as a whole. That includes raising the level of confidence of retail consumers of financial services. To implement this model in the nonbank financial sector, the NBU can use its experience of comprehensively reforming its corporate governance system in banks in recent years.

The NBU adheres to the principle of transparency. The vision for approaches to regulating the nonbank segment is set out in the White Paper that was published almost a year ago and that can be viewed by all interested parties on the NBU’s website. The document presents a vision of the new regulation of the nonbank financial market. This document outlines the NBU’s approaches to market segmentation, licensing, prudential supervision, reporting, inspections, corporate governance, and consumer rights protection.

In particular, the NBU is convinced that the new model of the regulation of nonbank financial institutions should be aimed at achieving the efficiency and transparency of the nonbank financial market.

Within a month, we will begin to review the legislation sector by sector. This work will start during the following month. Based on the review of the laws and regulations, the NBU will prepare White Papers with detailed proposals on the regulation of certain segments of the nonbank financial market. These documents will be widely discussed by financial institutions, experts, and other stakeholders (consumers, creditors, and financial service investors).

First, the Solvency II Directive provides for the introduction of the principle of proportionate regulation. This will allow middle-sized and regional insurance companies to operate under a simplified procedure. We plan to introduce the principle of proportionality in stages, with due account for the specifics of insurance and reinsurance companies. 

The main criteria to be taken into account are:

• volume of insured risks
• type of activities
• scale and complexity of business (including the number of insurers). 

Second, the NBU plans to develop schedules for aligning the activities of insurance companies with the new requirements, but only after it has conducted a thorough study of insurance market conditions and after taking into account the feasibility of the deadlines and the actual capability of insurers to meet the requirements. These graphs will be made public, of course. We will publish them and communicate with market participants.

There will be no relicensing. This is a myth that is often used by those who oppose the split. All licenses issued by the NFSC will remain effective, including permanent ones. There will be no automatic revocation of licenses.

The NBU’s concept of the licensing of nonbank financial institutions introduces a number of key innovations. One of them is to assess business plans of financial institutions before issuing licenses.

Managers and shareholders of financial institutions must understand and take responsibility for the risks involved. A prerequisite for this is for managers to draw up well thought-out, quality-oriented business plans.

In assessing a business plan, the NBU will be able to analyze the company’s business model and evaluate the availability of resources for its implementation. This analysis is needed to assess the viability and sustainability of an institution.

The reform of the nonbank financial sector and the implementation of the NBU’s regulatory vision will require major amendments to the regulatory framework. The White Paper thus also describes a model for the new legislative regulation of financial services markets.

The White Paper does not cover the full range of issues pertaining to the new regulation and supervision of the nonbank financial sector. Going forward, the NBU intends to issue additional White Papers on individual segments of the nonbank financial market. They will contain more details on the objectives and challenges of the regulation and supervision of individual market segments.

The draft new model of regulation provides for different approaches to the regulation and supervision of nonbank financial institutions depending on the sources and types of funds for their activities. One segment will comprise credit institutions that will be allowed to raise funds from the general public to make loans and provide other financial services.

These credit institutions will have to meet capital requirements and other financial ratios in line with EU requirements/ratios that have been set by Directive 2013/36/EU on activities of credit institutions and by Regulation No. 575/2013 on prudential requirements for credit institutions and investment firms. Under these documents, the minimum requirement for regulatory capital should amount to EUR 5 million.

Of all credit institutions, special status will be granted to credit unions that will be allowed to provide financial services out of repayable funds without meeting EU capital and prudential requirements. The exemption of credit unions from these requirements is in line with Directive 2013/36/EU on activities of credit unions. However, the Association Agreement between Ukraine and the EU stipulates no such exemption for Ukrainian credit unions. 

Some of the issues that have to be regulated are more technical and procedural in nature. Regulating these issues through the adoption of NBU regulations does not in any way contradict Article 19 of the Constitution of Ukraine, which does not forbid government authorities to make decisions on these issues as part of their purview.

It should be noted that, as a general principle, only the most important social relations or principles of the establishment and functioning of certain markets are subject to regulation at the legislative level. The principle noted above is thus fully in line with the regulatory model where lawmakers only regulate the most important issues, including licensing, while less important issues are regulated through regulations adopted by public authorities (NBU regulations in our case) in accordance with the laws mentioned above and the Constitution.

It is also important to understand that the draft law, which an entity with the power of legislative initiative has submitted for consideration by the parliament, is technical in nature and does not introduce new regulatory rules. The mechanisms used by the NFSC under applicable laws will be transferred to the NBU and the NSSMC in accordance with the distribution of powers to regulate the financial services markets, and will be applied during the transition period before the new regulation takes effect under paragraph 14 of the draft law. The NBU and the NSSMC will, within one year from the day this law goes into force, develop and submit to the Verkhovna Rada of Ukraine the draft laws on improvement of state regulation of financial service activities, including draft laws on regulation of certain financial markets.

We don’t have such plans at this point.

Building an efficient and stable financial market is impossible without a high level of consumer confidence. Fair market behavior and effective and systematic protection of the rights of consumers of financial services are among the key elements of the regulatory model for all segments of the nonbank market.

The NBU will focus its efforts on preventing unfair practices that violate consumer rights. This will be achieved by conducting inspections of financial institutions for compliance with rules on the provision of financial services, by monitoring compliance with legislation on advertising, and by reviewing consumer appeals.

Violations of rules to provide insurance services detected when inspecting insurance companies or when reviewing customer complaints will be the grounds for imposing large restrictive fines. That will encourage the violating entities to revise their practices and refrain from further violations.

The NBU will also focus on such important issues as the implementation of an effective system of consumer compensation and raising insurers’ responsibility for unfair market behavior and/or dissemination of misleading advertisements.

At the same time, the effective consumer rights protection requires the Verkhovna Rada to approve draft law 1085-1 in the second reading and as a whole. The draft law proposes to give the NBU a mandate to protect consumer rights, oblige financial institutions to disclose information about the real value of financial products and services, prohibit to press unneeded services on clients and make changes to agreements without notification, and so forth.

The Split will provide for a transparent and reliable financial sector which Ukrainians can trust. This will enhance financial inclusion among the public.

Part 1 paragraph 25 indent 18 of Article 1 of the Law of Ukraine On Preventing and Combating the Legalization (Laundering) of Proceeds from Crime and the Financing of Terrorism and the Proliferation of Weapons of Mass Destruction defines domestic politically exposed persons as executives of administrative, management, or supervisory bodies of designated legal entities (director/CEO, chairman of the board, chairman of the supervisory board). The NBU therefore believes that members of executive bodies or supervisory bodies of state-owned enterprises or business entities with over 50 percent of authorized capital owned by the state do not belong to the category of domestic politically exposed persons if they are not chairpersons of said bodies.

The legal grounds for applying and lifting sanctions are defined in the Law of Ukraine On Sanctions.

The procedure for financial institutions to execute personal sanctions, in particular the freezing of the assets of individuals and/or legal entities based on a decision by the NSDC of Ukraine, is stipulated by NBU Board Resolution No.654 dated 1 October 2015.

Any decision on imposing sanctions should contain a timeframe for their implementation excluding the sanctions that carry a suspension of rights or other sanctions that in essence cannot be applied temporarily (pursuant to Article 5 Part 5 of the Law of Ukraine On Sanctions).

The procedure for imposing personal sanctions (in particular, freezing assets) on the individuals and legal entities listed in annexes to decisions by the NSDC is outlined by NBU Board Resolution No.654 dated 1 October 2015.  The actions taken by banks as stipulated by the resolution have to be applied to the entities in the sanctions lists for the entire duration of the sanctions.

The obligations and actions of nonbank financial institutions during the execution of financial transactions involving or in favor of persons included in the sanctions lists are stipulated in paragraphs 2 and 3 of NBU Board Resolution No. 654 dated 1 October 2015.

Halting of financial transactions under the AML/CFT Law and sanctions such as freezing assets and halting financial transactions under the Law On Sanctions should be differentiated taking into account the difference in their legal nature and application (NBU Letter No. 25-0007/33410 dated 18 June 2018).

The procedure for halting financial transactions under the AML/CFT Law is stipulated by Article 17 thereof.  The procedure for imposing sanctions is stipulated by NBU Board Resolution No. 654 dated 1 October 2015.

Banks are limited to crediting their own correspondent accounts with banks under sanctions pursuant to paragraph 1 subparagraph 7 indent 12 of NBU Board Resolution No. 654 dated 1 October 2015.

However, the laws do not ban correspondent relations with sanctioned banks and do not ban the transfer of balances from accounts open with sanctioned banks to correspondent accounts open in other banks that are not under sanctions, subject to the requirements of paragraph 3 of the abovementioned resolution.

Imposing, lifting, and amending sanctions are stipulated by Article 5 of the Law of Ukraine On Sanctions.  Part 7 of Article 5 stipulates who approves decisions on lifting sanctions.

The bank at its own discretion should conduct a risk-based analysis and decide whether it is ready to take on the risks related to the client’s transactions under sanctions on limiting trade transactions.

Yes, a top manager form should be submitted for each member of the supervisory board of a NBFI, as the members of the supervisory board of a NBFI are considered to be top managers of such NBFI (paragraph 2 subparagraph 9 of Regulation No. 297).

The list of possible services and customers of a NBFI is established by the rules of a payment system where such NBFI is a participant.

In particular, a NBFI may service money transfers in the national currency – initiated by legal entities – without opening an account, including in favor of other legal entities, if such transfers are stipulated in the rules of a payment system that executes a transfer.

Effective regulatory documents of the NBU set no direct restrictions on combining the execution of money transfers in the national currency without opening an account and the provision of other financial services.

The list of financial services subject to restrictions as to being combined with other services is established by the Regulation On Restrictions on Combining Operation of Financial Institutions with Provision of Certain Types of Financial Services approved by Instruction of the State Financial Services Markets Regulation Commission of Ukraine No. 1515 dated 8 July 2004.

Please note that it is prohibited to combine the provision of money transfer services with the professional activity in the exchange market.

The definition of postal services is set out in Article 1 of the Law of Ukraine On Postal Communication. The list of postal services is regulated by the Rules for Provision of Postal Services as approved by CMU Resolution No. 270 dated 5 March 2009.

The services of freight forwarding and transportation are not included in the postal services according to the aforementioned regulatory documents and are regulated by the special legislation, in particular, the Law of Ukraine On Freight Forwarding Activities.

A financial institution will not be able to obtain a license for the provision of cash collection services to banks, as this type of activity, according to the law on financial services, is not a financial service. Any legal entity (that is not a financial institution) may apply to the NBU for a license for the provision of cash collection services to banks.

At the same time, to cover solely its own transportation needs, a financial institution may create an internal cash collection unit with the required level of technical equipment.

First, a legal entity has to obtain a license for the provision of cash collection services. Next, it should apply to the NBU to obtain approval for the cash processing and storage operation (in line with Regulation No. 926).

A legal entity may apply to the NBU to obtain a license for the execution of money transfers without opening an account and a license for currency operations, provided that such legal entity had acquired the status of a nonbank financial institution. For this purpose, a legal entity has to preliminary apply to the National Commission for the State Regulation of Financial Services Markets in order to be recorded in the State Register of Financial Institutions. In addition, a postal service operator may apply to the NBU for a respective license.

Any legal entity (that is not a financial institution) may apply to the NBU for a license for the provision of cash collection services to banks.

A NBFI may apply simultaneously for a license for the execution of money transfers in the national currency without opening an account and a license for trading currency valuables in cash. However, to obtain a license for currency operations (money transfers), a NBFI must execute hryvnia money transfers for a year at least (Regulation No. 297 paragraph 15 subparagraph 1).

Yes, but no earlier than in 90 days after such NBFI receives a copy of the decision on the denial of a license and eliminates the grounds for the denial.

Yes, a top manager form should be submitted for each member of the supervisory board of a NBFI, as the members of a supervisory board of a NBFI are considered to be top managers of such NBFI (paragraph 2 subparagraph 9 of Regulation No. 297).

No. If the financial statements are already included in an auditor's report, a NBFI doesn’t have to submit them as a separate document.

All documents subject to submission to the NBU should be submitted with their electronic copies (Section I paragraph 5 of Regulation No. 43).

Yes, it is.

For the execution of money transfers with the involvement of two payment systems (involving a resident payment system and another resident/nonresident payment system), it is required to submit to the NBU an application and the respective amendments to the payment system rules (in line with Section II paragraph 13 of Regulation No. 43).

Participants in payment systems may provide money transfer services as established in their internal rules of money transfers and the rules of a payment system that transacts a transfer.

The list of services and customers to receive money transfer services is established by the rules of a payment system.

In particular, participants in payment systems have the right to provide money transfer services to legal entities, including in favor of other legal entities, if this is stipulated by the rules of a payment system that executes a transfer.

A nonresident operator or a representative office of an international payment system, or a Ukraine-based settlement bank of an international payment system, or an authorized nonresident institution may apply to the NBU for the above purpose.

This is an international payment system that ensures online payments and settlements using the payment instruments of the international payment systems, the details of which are recorded to the Register of Payment Systems, and with the electronic money of such international system of online settlements, provided that funds are charged/credited from/to the system solely through bank accounts.

To obtain an approval of the terms and procedure of operation in Ukraine, an international system of online settlements should submit to the NBU the following documents:

1) an application for the approval of the terms and procedure of operation in Ukraine of an international system of online settlements

2) a copy of one of the following documents issued by a foreign authority:

• an abstract from a banking, commercial, or judicial register or other official document confirming the registration of an international system of online settlements
• a permit, license, or other document authorizing an international system of online settlements to conduct activity in the area of international money transfers

3) an information note that should include the description of the following:

• types of money transfer services to be provided by the international system of online settlements, indicating the initiators and recipients of money transfers (legal entities and/or individuals), types of currency transfers, etc.
• a general scheme of transfer execution, including the movement of information messages and the movement of funds since the initiation of a transfer by a user until the completion of mutual settlements under such transfer in the international system of online settlements (including a schematic representation), indicating full names and addresses of the legal entities concerned (settlement banks, processing centers, service organizations, etc.).

An operator, a representation office, or a Ukraine-based settlement bank of an international system of online settlements, or an authorized nonresident institution, may apply to the NBU to obtain approval of the terms and procedure of operation in Ukraine of an international system of online settlements.

No, the service is free.

Yes, the legislation sets no restrictions as to the number of payment systems that may have a NBFI as a participant.

When the name of a legal entity is changed due to a change in the type of a joint-stock company (for instance, if it becomes JSC instead of PJSC), such participant in an international payment system is not required to obtain a new registration certificate of the participation in an international payment system.

If necessary, a participant in an international payment system may, upon its own initiative, apply to the NBU for revocation of its registration certificate and issuance of a new one.

According to the general rules for the provision of payment infrastructure services, it is required to obtain approval of the terms and procedure of operation of a payment infrastructure services operator.

At the same time, a payment system operator has the right to provide payment infrastructure services within its payment system without acquiring the status of a payment infrastructure services operator.

A PCI DSS certificate is submitted to the NBU when a payment system operator intends to process data on transactions with the international card payment systems.

In all other cases, no PCI DSS certificate should be submitted.

It is not at present. According to the Law of Ukraine On Payment Systems and Money Transfer in Ukraine, only banks may issue electronic means of payment (including payment cards) within Ukraine.

Yes, it is. A change of a payment system operator leads to the major changes in the terms and procedure of operation of such payment system.

To register an intrabank payment system, it is necessary to submit to the NBU an application containing the following:

• name and code of the bank
• name of the intrabank payment system
• list of money transfer services to be rendered via the intrabank payment system.

An intrabank payment system operates in line with the internal documents of the respective bank.

To participate in a Ukrainian payment system, a nonresident legal entity has to obtain a permitting document (a license, certificate, permit, etc.) issued in line with the national legislation of the country where a nonresident legal entity is registered, which permits operation of a nonresident legal entity in the area of international money transfers.

Any legal entity registered in Ukraine may become a payment system operator.

No. The documents confirming the compliance of top managers of NBFIs with the additional fit and proper requirements are to be submitted only by the NBFIs intending to trade currency valuables in cash.

The NBU contributes to the establishment of the most favorable conditions for service members to discharge their liabilities to banks.

The NBU has provided recommendations for banks to review their terms of the repayment (restructuring) of liabilities under the loan agreements with the borrowers liable for military service who have been enrolled. This includes reliefs from penalties and delays in the principal and interest payments under the loans. After having reviewed the recommendations, banks announced that they would apply an individual approach to the restructuring of the debt of each borrower liable for military service.

Meanwhile, the Verkhovna Rada of Ukraine has established by law that no interest on using the loan and no penalty interest for the failure to discharge liabilities to individuals and enterprises, institutions, and organizations of all forms of ownership, including banks, shall be imposed on reservists and persons liable for military service.

We advise the borrowers liable for military service who have been enrolled in the Armed Forces of Ukraine to apply to banks in writing requesting to restructure the debt under favorable conditions.

Any bank has the right to conclude an agreement with the third party to receive the services of collection of debt from this bank’s borrowers.

When a collection agency takes measures to collect the debt, such measures are normally taken on behalf and at the expense of a bank and to the extent established by an agreement between the bank and the agency.

However, such measures should not violate the terms of the loan agreement resulting in a default that created the legal effects for the bank’s borrower.

Collection agencies are not bank institutions. Therefore, control of a collection agency is outside the NBU’s powers.

You are entitled to defend your rights and freedoms against violations and infringements by any means not prohibited by law.

The NBU takes into account the information given by citizens in their applications (requests, appeals) when exercising the banking supervision.

The applications (requests, appeals) of citizens cannot be deemed as the grounds for the NBU to appoint an unscheduled inspection of a bank.

The inspections of banks are performed in order to identify the level of safety and stability of bank’s operations, reliability of bank’s reporting and bank’s compliance with the Ukrainian laws on banks and banking and the NBU regulations.

If you think that there are signs of a crime in the actions of the Bank`s employees, you are entitled to apply to the court, the prosecutor, the investigator and the agency of inquiry in order to initiate criminal proceedings, apply all measures provided for by law to establish the crime, the perpetrators of the crime, and their punishment.

Detection of fraudulent actions of citizens is not part of the functions of the National Bank of Ukraine.

Forced execution of court decisions in Ukraine is performed by the State Enforcement Service.

Supervision over execution of court decisions by banks of Ukraine goes beyond the powers of the National Bank of Ukraine. The National Bank of Ukraine has no legal grounds to instruct the bank on how to execute a court decision.

Supervision over banks on their compliance with the legislation on the protection of personal data and the conduct of appropriate inspections lies beyond the powers of the National Bank of Ukraine, and is carried out by the State Service of Ukraine for the protection of personal data.

The Register of Borrowers accounts the clients of Ukrainian banks having arrears to banks, preserve the banking information about clients and ensures the access of authorized banks to information about the client.

Banks independently provide the necessary information about their clients to the database of the Bank’s Register of Borrowers and bear the full responsibility for the reliability of the information provided in accordance with the current legislation.

Therefore, in order to resolve this issue, you need to contact the bank directly.

With no limitations, banks are obliged to accept from individuals and legal entities the worn banknotes with no signs of being counterfeited that have the signs of being worn or damaged, such as worn ink, stains, stamps, tears, cuts, holes, and missing pieces or corners.

Cashiers of banking institutions must accept, with no limitations, a banknote with the signs of being significantly worn and no signs of being counterfeited, if:

• some 55% of the banknote’s initial surface area remained undamaged, and

• the banknote is torn (cut) in two pieces that both have the same number and series, given the total area of the pieces is not less than 55% of the banknote’s initial surface area.

Banks are obliged to withdraw the damaged banknotes that were put together of two or more pieces, accept them for examination on the initiative of presenting citizens as the banknotes of doubtful authenticity and/or fitness, and send them for examination to the corresponding NBU regional units. Based on the results of the examination, which the NBU carries out free of charge, the correspondent value of the domestic banknotes and coins that were found authentic and fit is reimbursed to customers.

If the examination finds that the banknotes are counterfeits or have been damaged during the state of emergency, they will be withdrawn from circulation with no reimbursement and duly forwarded to law-enforcement authorities to conduct the investigation.

In order to exchange the banknotes in the domestic currency (hryvnia) that are worn, damaged, or of doubtful authenticity and/or fitness for the banknotes that are fit for circulation, please contact any Ukrainian bank (any branch or office).

Such exchange is performed free of charge and without any limitations.

Banks and financial institutions are obliged to check the attributes of fitness and authenticity of the foreign banknotes with the cash handling equipment used to check the UV, infrared, and magnetic protection and perform the visual inspection against the sunlight or reflected light and with the zoom of at least 10x. A person responsible for the identification of wear degree, authenticity, and fitness of foreign banknotes is a cashier of a bank or a financial institution who conducts the FX transaction. If the foreign banknotes with minor damage correspond to the samples defined by an issuing bank and have preserved the fitness attributes, they are recognized as fit for use and must be accepted by authorized banks.

The foreign banknotes that became significantly worn or have major damage are accepted by cashiers of authorized banks or financial institutions for collection. The banknotes accepted for collection are sent to a foreign correspondent bank under the respective agreement to be exchanged for the new banknotes. In case a bank has doubts about authenticity of foreign banknotes, it must withdraw them and send for examination to the NBU. In addition, a bank has to accept for examination the doubtful foreign banknotes based on the presenter’s written request. The NBU examines the foreign banknotes of doubtful authenticity free of charge. The foreign banknotes that were recognized authentic, regardless of their wear degree, are returned to the person who has requested the examination. The counterfeit banknotes and coins are withdrawn without reimbursement and forwarded to the National Police of Ukraine under the established procedure for further investigation.

In order to exchange the foreign banknotes that are worn, damaged, or of doubtful authenticity and/or fitness for the banknotes that are fit for circulation, please contact any Ukrainian bank (any branch or office) that conducts operations with the corresponding foreign currency.

Може. Відповідно до пункту 21 розділу ІІ Положення про ведення касових операцій у національній валюті в Україні, затвердженого постановою Правління Національного банку України від 29.12.2017 № 148 (зі змінами), суб’єкти господарювання під час здійснення розрахунків із споживачами за готівку зобов’язані приймати у сплату за продукцію (товари, роботи, послуги) без обмежень банкноти і монети (у тому числі розмінні, обігові монети, пам’ятні банкноти та монети, зношені банкноти та монети) усіх номіналів, які випускає Національний банк України в обіг, що є платіжними засобами і не викликають сумніву в їх справжності та платіжності. 

Сумнів касира підприємства (підприємця) стосовно справжності та/або платіжності грошових знаків є суб’єктивним і не є остаточним. 

У разі виникнення сумніву щодо справжності та/або платіжності готівки касир підприємства (підприємець) не приймає таку готівку у сплату за товари (роботи, послуги). Відповідно касова операція не  відбувається. При цьому суб’єкти господарювання мають право запропонувати споживачу сплатити вартість товару іншими банкнотами та/або монетами, а із сумнівними щодо справжності та/або платіжності грошовими знаками звернутися до будь-якого банку (філії, відділення) для їх обміну на придатні до обігу грошові знаки або надсилання їх на дослідження до уповноваженого підрозділу Національного банку.

Yes. According to Section II paragraph 8 of the Rules¹, banks and other legal entities have no right to accept the banknotes that were damaged by fire, water, various liquids and chemicals, etc. with the surface area that may decrease during the acceptance and processing to under 55% of the initial surface area. If the damage of two or more banknotes led to them gluing (sintering) together, a person presenting these banknotes is not advised to violate the integrity of a group of glued banknotes.

The banknotes that have been contaminated with chemicals, radioactive substances, or any toxic organic substances influence or may influence under certain circumstances the person’s health.

The NBU regional units exchange the authentic banknotes that have been contaminated with chemicals, radioactive substances, or any toxic organic substances, only if there is a document on disinfection and/or decontamination granted by an institution (person) that is responsible for carrying out these operations under the legislation of Ukraine. Individuals and legal entities are obliged to contact directly the correspondent NBU regional units to exchange such banknotes. The authorized NBU units take the decision to exchange a banknote in the presence of the banknote’s presenter or accept them for examination upon the presenter’s application, the form of which is given in Annex 2 to the Rules¹.

The NBU regional units exchange the authentic banknotes that have been contaminated with chemicals, radioactive substances, or any toxic organic substances, only if there is a document on disinfection and/or decontamination granted by an institution (person) that is responsible for carrying out these operations under the legislation of Ukraine. Individuals and legal entities are obliged to contact directly the correspondent NBU regional units to exchange such banknotes. The authorized NBU units take the decision to exchange a banknote in the presence of the banknote’s presenter or accept them for examination upon the presenter’s application, the form of which is given in Annex 2 to the Rules¹.

When do the rounding rules come into effect?
The rules come into force on 1 July 2018.

How exactly will check totals be rounded?
The rounding will follow a mathematical principle. If a check total ends in 1, 2, 3, or 4 kopiikas, it will be rounded down to the nearest zero. If a check total ends in 5, 6, 7, 8, or 9 kopiikas, it will be rounded up to the nearest zero.

Will the NBU stop producing small change?
Yes. The central bank will stop manufacturing 1, 2, and 5 kopiika coins, as these coins have lost their purchasing power. It will also no longer produce 25 kopiika coins because, in the absence of 1, 2 and 5 kopiikas, it will be impossible to break 25 kopiikas using only 10 kopiika coins.

Will Ukrainians still be able to use small change to pay for goods and services?
Yes. 1, 2, 5, and 25 kopiikas will remain legal tender indefinitely.

How long can people exchange or surrender their old coins?
1, 2, 5, and 25 kopiikas will remain legal tender indefinitely. There is no need to exchange them, as they will continue to be used for payment.

Where can one exchange small change for larger denomination coins or banknotes?
All coins can be exchange for banknotes or other (larger denomination) coins at bank branches.

Will rounding apply to the price of every item in a check?
Only check totals will be rounded.

Will check totals still be rounded when consumers can pay the exact amount?
If a buyer or a seller have the required coins, they will be able to use them to make a payment or to give change.

Will check totals be rounded for cashless payments?
No. Rounding will not apply to cashless payments.

Will financial institutions be obliged to accept kopiikas?
Kopiikas remain legal tender in Ukraine. All financial institutions are obliged to accept kopiikas as a means of payment and to credit them to accounts.

Will companies be able to use kopiikas to give change?
Yes. If a company has the required coins, it can use them to give change.

 Will companies be required to comply with the rounding rules?
If the buyer and the seller have no coins of required value, companies will have to round check totals for any cash payments, as set forth by the rounding rules.

Will a company have to round a total when a customer asks for a refund?
If a refund is made in cash and the required coins are not available, companies will round the total in accordance with the rounding rules.

Will companies be required to show check totals before and after rounding? Will companies have to reprogram their cash registers?
Companies will have to show check totals before and after rounding has been applied, in particular, when they use markups/discounts. Reprogramming cash registers will not lead to significant additional costs for companies.

Для обміну значно пошкоджених банкнот гривні, які втратили платіжні ознаки внаслідок пожежі, катастрофи, стихійного лиха чи іншого нещасного випадку, а також побутового пошкодження, необхідно звертатись до регіональних підрозділів грошового обігу Національного банку України. Наразі підрозділи Національного банку є в Дніпропетровській, Одеській, Харківській, Хмельницькій, Львівській областях та м. Києві.

Пред’явнику банкнот не рекомендується самостійно порушувати цілісної групи банкнот, якщо пошкодження двох або більшої кількості банкнот призвело до їх склеювання (спікання).

У разі відсутності в регіоні підрозділу грошового обігу Національного банку України необхідно звертатись до уповноважених банків, яким надано повноваження на зберігання запасів готівки Національного банку. На цей час такі повноваження мають три банки – АТ "Ощадбанк", АТ КБ "ПриватБанк", АТ "Райффайзен Банк Аваль".

Уповноважені банки не обстежують значно пошкоджені банкноти, а пакують їх з максимальним збереженням цілісності та передають як сумнівні для проведення досліджень до Департаменту грошового обігу Національного банку України разом із заявою пред’явника, довідкою про вилучення (прийняття) банкнот для дослідження та іншими документами щодо ситуації, внаслідок якої виникло пошкодження банкнот (довідка про пожежу, катастрофу, виникнення іншої ситуації).

За результатами досліджень, які проводяться Національним банком України безкоштовно, клієнтам відшкодовується відповідна сума грошових знаків національної валюти, визнаних справжніми і платіжними. Неплатіжні банкноти Національний банк не відшкодовує.

Фізичні та юридичні особи в разі сумніву щодо справжності банкнот іноземної валюти можуть звернутись до банків (філій, відділень), що здійснюють валютно-обмінні операції.
Банк (філія, відділення) приймає такі банкноти і разом із заявою пред’явника та довідкою про вилучення (прийняття) банкнот для дослідження передає Національному банку України.
Дослідження сумнівних щодо справжності банкнот іноземної валюти здійснює Департамент грошового обігу Національного банку України безкоштовно.
Банкноти іноземної валюти, які за результатами дослідження визнані справжніми, незалежно від ступеня зношення та пошкодження повертаються ініціатору дослідження (банку).
Підроблені банкноти вилучаються з обігу, не повертаються і не відшкодовуються, а в установленому порядку передаються уповноваженим працівникам національної поліції України.
Про результати дослідження банк зобов’язаний проінформувати клієнта, повернути йому справжні банкноти іноземної валюти або за його бажанням прийняти ці банкноти для здійснення касових операцій.
З актом про дослідження сумнівних банкнот клієнт може ознайомитися під підпис.
Звертаємо увагу, що Національний банк України не проводить касових операцій з банкнотами іноземної валюти, у тому числі не здійснює обмін зношеної та пошкодженої іноземної валюти.
Касові операції зі справжніми зношеними та пошкодженими банкнотами іноземної валюти здійснюють банки (філії, відділення), небанківські фінансові установи, які приймають такі банкноти на інкасо

Price stability does not imply that prices do not change; it means that prices grow at a moderate pace.

No central bank seeks to achieve zero inflation. Inflation being close to zero poses the risk of deflation that is just as bad for the economy as high inflation.

In the majority of developed countries, price stability is achieved when inflation is low and stable, at a level of 1%–3%. Central banks in developing countries usually set higher medium-term inflation targets, which range between 4% and 8%. In Ukraine, the NBU has set the medium-term inflation target, as measured by the year-on-year CPI growth, at 5% ±1 pp.

Price of any goods, including foreign currency, depends on demand and supply. If supply of foreign currency decreases substantially for some reason (while demand is maintained), the domestic market faces a deficit of foreign currency. As everybody knows, a shortage of any goods causes an immediate rise in their prices.

In a case like this, the NBU would have to sell foreign currency from its stocks, the international reserves, in order to fix the exchange rate at a certain level. However, this treats the symptoms, not the illness. The problem that has made demand for foreign currency exceed the supply will continue to weigh on the economy. Holding the hryvnia exchange rate at a non-market level drains the international reserves. When reserves are depleted to the extent that they are not sufficient to support the fixed exchange rate, the domestic currency collapses. Most often, that is accompanied by an economic crisis, which undermines welfare of households, stability of the banking system, and solvency of the country. This happened twice in Ukraine over the last decade – in 2008 and 2014.

On the other hand, the floating exchange rate allows producers and consumers to adapt to the changing economic environment and withstand negative shocks. For example, lower global prices for Ukrainian exports lead to a decline in inflows of foreign currency proceeds to the country. In this case, the hryvnia exchange rate would gradually go down, which lowers the production cost of goods in dollar terms. This would mitigate the adverse impact on output. In other words, depreciation of the hryvnia maintains competitiveness of Ukrainian goods abroad, which means that there is no need to reduce the output.

Obviously, the weakening of the domestic currency has negative consequences as well: imported goods and foreign travel become more expensive for households. Nevertheless, this is a lower price to pay compared to a decline in output and an increase in unemployment.

Money is a special commodity, but, like all other commodities, it carries value only if limited in quantity. In case a central bank issues (or, as people sometimes say, “prints”) money to cover government spending, it increases the amount of money in circulation greatly. However, the total demand for goods and services grows faster than the economy’s capacity to produce them, which would imminently translate into higher inflation.

That is, using money issue to finance the country’s needs can lead to adverse effects for the economy and public welfare, due to:

• inflationary processes
• depreciation of the domestic currency against foreign currencies
• an adverse long-term impact on economic growth.

For example, take Ukraine’s negative experience of the 1990s, when the NBU financed loans to some economic sectors and the large budget deficit. This made the macroeconomic situation in the country uncontrollable. In 1992–1994, inflation peaked at over 10,000%, and real GDP fell by 9.7% in 1992, 14.8% in 1993, and 22.8% in 1994. This resulted in a drastic decline in the living standards.

The initial issue of money is always conducted in cashless form through banks only (as the NBU operates exclusively via banks). The NBU can issue money using three channels:

• the credit channel, when banks take loans from the NBU providing government securities or foreign currency as collateral; the NBU credits these funds to the banks’ accounts
• the currency channel, when banks sell foreign currency to the NBU, which credits hryvnia funds to their accounts in exchange
• the stock exchange channel, when the NBU buys securities from banks and credits hryvnia funds to their accounts.

Issue of cash always derives from the noncash issue of money. A bank asks the NBU to debit its account and receives cash at the NBU’s cash desk. After that, the bank can distribute cash to its customers by debiting cash funds from their accounts. At the same time, the amount of money in the economy does not change: of cash hryvnia decrease, while hryvnia cash grows by the same amount.

The general requirements for the preparation, authorization, and submission of reporting to the NBU are prescribed under the Rules of Statistical Reporting approved by NBU Board Resolution No. 120 dated 13 November 2018 (as amended) and NBU Board Resolution No. 84 dated 26 June 2020

Data are submitted to the NBU at different intervals: daily, every tenth day, monthly, quarterly, semi-annually, annually, and upon request.

The data are used to perform regulatory and supervisory functions, including over currency markets, in accordance with Ukrainian law. Based on the information provided, the regulator creates:

• monetary, financial, banking statistics, and financial services market
• balance of payments, international investment position, and external debt statistics.

Public information is released on the Official website of the NBU.

The NBU receives reporting from:

• Ukrainian banks and foreign bank branches operating in Ukraine;
• nonbank financial institutions under government regulation and supervision of National Bank of Ukraine since 01 July 2020 according to Law On Amending Some Laws That Improve State Regulation of Financial Services Markets No. 79-IX dated 12 September 2019
• resident nonbank institutions, resident nonbank financial institutions that are payment system operators or members of payment systems, and payment service providers
• nonbank financial institutions with NBU license for conducting currency transactions or NBU general license for conducting currency transactions (granted before the Law of Ukraine On Currency and Currency Operations came into effect)
• nonbank financial institutions, enterprises, organizations, and sole proprietors that have accounts abroad. Diplomatic, consular, trade, and other Ukrainian official missions abroad are excluded, as are stand-alone units of residents
• postal service providers.

Respondents (reporting providers)  are prepared and submitted to the NBU as files signed electronically by a designated person as set out in the relevant regulations..

The Register of Statistical Reporting Indicators Pursuant to Rules No. 120 and Register of Reporting Indicators for Non-banking Financial Institutions posted on the Official website of the NBU outlines all the required pieces of information, including details on identifiers and names of indicators, metrics, units of measurement, parameters, consolidation levels, unclassified details of indicators, references to legal acts, rules and requirements for estimating indicators, file numbers, submission frequency and deadlines, respondents, and the procedure for verifying data

Respondents submit Reporting Indicators in XML and JSON formats. Text information (explanation) is provided in scanned form.

Reporting indicators are checked for compliance with NBU requirements on three levels:

• primary: technical control, verification of data structure performed by the respondent that submits the information to the NBU;
• secondary: NBU control during acceptance of reporting indicators;
• expert control of data quality, integrity, time synchronization, consistency with data from other sources, compliance with international statistical standards and reporting. This step is conducted by the NBU to determine whether there is a need to amend the files.

The descriptions of the primary and secondary controls for each reporting file are posted on the pages of the Register of Statistical Reporting Indicators Pursuant to Rules No. 120 and Register of Reporting Indicators for Non-banking Financial Institutions.

If the NBU has any concerns regarding the indicators based on the findings of the control process, the respondent must provide the NBU with an explanation.

If the respondent or the NBU find errors in the data, the respondent can submit a replacement file. This can take place before the deadline at the respondent’s discretion or after the deadline by permission of the NBU.

Monetary policy's primary objective is achieving price stability. It relies on the consumer price index to measure its progress. By contrast, macroprudential policy aims at ensuring financial stability, which is a qualitative (unquantifiable) objective and does not have universal indicators to evaluate its performance.

However, a range of indicators helps measure financial stability. These include the nonperforming loans ratio in the economy, debt burden ratios, the loan-to-value (LTV) ratio, and many more. In addition, there are integrated indicators that facilitate assessment of the state of the financial sector (e.g., the financial stress index presented in the NBU’s Financial Stability Report), although they have low predictive power.

While assessing financial stability, central banks also test the system’s resilience under various scenarios (including adverse scenarios), look into financial connections between financial institutions (with their peers and clients), and survey banks and enterprises.

Apparently, in most countries, central banks are the regulators that command necessary knowledge, expertise, and resources (human, organizational, and financial) to promote financial stability. As a result, promoting financial stability has become part of the mandates of many central banks around the globe.

The NBU received its financial stability mandate in 2015. The Law of Ukraine On the National Bank of Ukraine empowers the NBU to promote financial stability (as the second top function after maintaining price stability).

The NBU can deploy a wide range of instruments to ensure financial stability. First, the NBU analyzes the data and warns banks about the risks it has identified. If the warning is not enough, the regulator can use macroprudential instruments such as capital requirements, liquidity requirements, and other (sectoral) measures.

The NBU complies with the recommendations of the European Systemic Risk Board (ESRB) of 2013 to designated authorities on clear public identification of targets and tools for macroprudential policy. In the vast majority of European countries, macroprudential policy targets and tools have been identified and published in macroprudential strategies. In line with the European practice, the NBU has identified the policy's objectives and instruments in its Macroprudential Policy Strategy. Moreover, the NBU regularly informs the public about scheduled regulatory changes through its website and its official social media pages, as well as at meetings with the media, market participants, and experts.

The global recession of 2007–2008 contributed to the spread of policies aimed at identifying and limiting systemic risks in order to achieve financial stability. The recession damaged many financial systems and brought to the fore the vulnerability of the financial sector and the flaws in the work of regulators. One of these deficiencies was the lack of attention to the state of the financial system as a whole.

Macroprudential measures impose certain limitations on financial institutions. These may hold back the pace of development and cause losses not only for banks, but also for the economy as a whole. Macroprudential measures are actively used only when those restrictions help avoid large losses in future crises.

The BankID system of the National Bank of Ukraine (NBU) was established to ensure for the public a convenient and secure access to public, financial, commercial, and other services that can be provided remotely and require identification.

BankID performs transmission of personal data of users from the subscribed identifier (bank servicing the user’s account) to the subscribed service provider (providing services requiring such data). So, the system performs electronic remote identification of individuals.

BankID is accessible from a PC, laptop, or smartphone with Internet connection to every user with an account opened with BankID member bank.

To view the list of institutions supporting BankID follow the link.

Please note that request and confirmation of consent to transmit data are provided only by the personal data owner.

BankID subscribers are subscribed identifiers (banks) and subscribed service providers.

To become a BankID subscriber, an institution needs:

• to submit the Application of Intent of Accession to the NBU BankID System and respective documents
• to receive the decision of the NBU BankID System Council on approval of the accession to the system
• to enter into the Accession Agreement to the system
• to set communication between subscriber nodes with the central node of BankID
• to enter into and comply with the clearing and settlement services agreement
• to connect to the runtime environment

Please note, subscribed identifiers and subscribed service providers use BankID on commercial terms. Thus, subscribed identifiers (banks) have the option to monetize data transmission to subscribed service providers. Payment for user identification is charged directly to the subscribed service provider.

Yes, BankID identification is safe for users. BankID does not store personal data of users.

All user data is transmitted encrypted by BankID affixing a qualified electronic signature or a qualified electronic seal of the bank.

Only the personal data owner can initiate transmission of this data from the subscribed identifier to the subscribed service provider. Identification data shall not be transmitted to third parties without the user’s (data owner) consent.

For electronic devices not refilled with cash:

• account balance cannot exceed UAH 4,000.

For electronic devices refilled with cash:

• payment cannot exceed UAH 62,000 per year
• account balance cannot exceed UAH 14,000.

More about e-money limits and settlements (Ukr)

Refer to a bank and enter into an agreement.

Before entering into an agreement, the bank is compelled to inform the user about:

• the terms and conditions of the agreement
• the service fees
• the instructions for use.

The agreement should prescribe as follows:

• the account servicing procedure
• the rules for setting foreign currency sales, exchange and conversion rates
• the information about any limits and/or restrictions imposed on transactions
• the dispute resolution procedures
• the issuer’s and the user’s liabilities.

If an EMP is blocked or lost, if the ATM refuses to return the payment card, the ATM failed to dispense cash etc., please contact the issuing bank.

An interbank money transfer is executed within the period of up to three operational days.

This is provided for by Article 8 of the Law of Ukraine On Payment Systems and Money Transfer in Ukraine.

An operational day means the time within a business day of a bank or an institution participating in a payment system, over which they accept transfer and revocation documents from customers and may process, transfer, and execute these documents, where this is technically possible. Banks or institutions participating in a payment system determine the duration of their operational day at their own discretion and document this duration in their internal regulations.

Guidelines on Domestic Currency Interbank Money Transfers in Ukraine approved by NBU Board Resolution No. 320 dated 16 August 2006.

The System of Electronic Payments of the National Bank of Ukraine (SEP) is a systemically important payment system, which was developed by the NBU to enable interbank money transfers in the domestic currency within Ukraine via accounts opened with the NBU.

The introduction of the European approaches to financial market regulation enables to enhance the instruments of consumer rights and interests protection, particularly the guaranteeing mechanisms in the markets of nonbank financial services, in order to improve the stability and reliability of the financial sector. The measures taken by the National Bank of Ukraine also will promote the improvement of financial services quality, as well as the transparency of information disclosed on product terms for financial services consumers.

The EU-Ukraine Association Agreement provides the possibility for the Ukrainian financial market to obtain the status of an EU internal market upon implementation of European regulation requirements in Ukraine.

Such a regime will improve the opportunities for Ukrainian business to work in the territory of the European Union. Ukrainian banks, insurance companies and other financial institutions that are regulated and supervised by the National Bank of Ukraine could provide their services in any EU state under equal conditions with the European market players in this sector.

Even before 2016, when the provisional application of Section IV of the EU-Ukraine Association Agreement started (it regulates the establishment of a free trade zone with the European Union), the National Bank of Ukraine was working on the approximation of domestic banking legislation to European rules and standards.

At present the NBU is also focused on the gradual liberalization of capital flows, updating the framework for payment systems operation, improving the mechanisms for combatting money laundering and terrorism financing, and enhancing consumer rights protection in financial services.

Since 1 July 2020. the NBU has become the regulator of nonbank financial institutions as well. We started the active work on introducing the European rules in this sector, above all in insurance services.

The specific tasks being implemented by the National Bank of Ukraine are defined in the Action Plan on EU-Ukraine Association Agreement implementation as approved by the Resolution of the Cabinet of Ministers of Ukraine No. 1106 dated 25 October 2017.

The main achievements are as follows:

• strengthening the banking system’s solvency and liquidity
• enhancing bank capital requirements
• introducing new liquidity ratios
• enhancing bank capital requirements
• introducing new approaches to credit risk assessment
• Enlarging the list of risks to be covered with capital
• introducing a new system for bank assessment in line with the European Supervisory Review and Evaluation Process (SREP) methodology
• a risk-based approach to conducting bank inspections.

The banking sector has been cleared of toxic and insolvent banks due to new approaches to banking supervision. Information on bank ownership structure was also disclosed, while the monitoring of bank operations with related parties was enhanced.  Updated requirements to the internal control system in  Ukrainian banks and banking groups, as well as an internal process of managing toxic assets management have been introduced.

A new, simple, comprehensible, and transparent regulatory framework of foreign exchange regulation is in place. The NBU eased or even canceled about 40 FX restrictions for businesses, banks, foreign investors, and households.

European Union support is given to the National Bank of Ukraine within the following Technical Assistance Projects:

• Strengthening the Regulation and Supervision of the Nonbank Financial Market (EU-FINREG) project. It is aimed at establishing a potent environment for nonbank financial services and providing assistance to the NBU in its approximation of the regulatory framework and supervisory methods over the nonbank financial market to European and international standards and practices

• Introduction of EU Practices on Accounting, Financial Reporting and Audit in Ukraine (EU-FAAR Project). It provides for assistance in the disclosure of standardized financial reporting in a single electronic format by all business entities, including banks and other financial institutions, according to the Law of Ukraine On Accounting and Financial Reporting in Ukraine

• Twinning Project: Strengthening the institutional and regulatory capacity of the National Bank of Ukraine to implement the EU-Ukraine Association Agreement. It will assist in institutional strengthening of the central bank through enhancing NBU strategic planning and improving the European integration process and international cooperation, as well as in establishing a reliable banking and payment infrastructure for business entities.