National Bank of Ukraine (NBU) decided to extend the list of currency restrictions for business to be lifted on 7 February 2019, when the Law of Ukraine On Currency and Currency Operations is coming into effect. The cancellation of more than 20 currency controls for individuals and legal entities was announced at the beginning of January. Now the NBU added more to the list:
- Businesses will be allowed to repatriate foreign-currency dividends for 2018. The total amount of repatriation transactions for dividends accrued up to and including 2018 will be limited to EUR 7 million per month.
- After 7 February, businesses will not be required to make hryvnia-denominated deposits prior to buying foreign currency (the so-called T+1 mode).
- The FX surrender requirement for business will be revised from 50% to 30% starting from 1 March.
The NBU also allowed individuals to purchase up to UAH 150,000 in foreign currency and investment metals online per calendar day instead of per business day. It means that people are able to buy currency through internet banking or applications 24/7.
In addition, the NBU clarified that legal entities are allowed to transfer (up to EUR 2 million of) their own (not purchased) currency for the purpose of depositing it abroad.
To prevent unproductive capital outflow, the NBU at the same time banned business and population from crediting, investing, or depositing in an aggressor/invader country, off-shore areas, and jurisdictions violating FATF recommendations or having significant deficiencies in that area. The restriction as to the purchase by banks of Ukraine’s Eurobonds will temporarily remain in effect.
The restriction as to the purchase by banks of Ukraine’s Eurobonds will temporarily remain in effect.
Some of the currency supervision requirements have been streamlined as proposed by the banking community. In particular, the banks are no longer required to compile a written report on every transaction and every agreement, saving their time and operating cost.
The NBU also cut the list of suspicious transaction indicators used for the purpose of currency supervision. For example, financial aid used as a source of transaction will not be considered a suspicious transaction indicator. Instead, a financial institution will analyze it when establishing source of funds.
The NBU estimates that all the loosening up will not create substantial pressure on the currency market.
As before, the NBU’s end goal is to gradually lift all the currency restrictions, allowing for the free movement of capital. The NBU will continue to remove the currency market restrictions as the macroeconomic situation in Ukraine improves, the Parliament approves the draft laws aimed at improving regulation of the nonbank financial market (the split draft law, registered as 2413a), and actions are taken to prevent unproductive capital outflow (the BEPS draft law On Implementation of the Plan to Counteract the Base Erosion and Profit Shifting, presented by the NBU and the Ministry of Finance in October).
The aforementioned amendments were approved by NBU Board Resolutions No. 33 On Amendments to Regulation on Analysis and Verification of Documents (Information) on Currency Transactions by Authorized Institutions dated 5 February 2019 and No. 35 On Amendments to Certain Regulatory Documents of the National Bank of Ukraine dated 6 February 2019.
The NBU Resolution No. 31 On Declaring Void Certain Regulatory Documents of the National Bank of Ukraine dated 5 February 2019 abolishes some of the NBU currency regulations that become void on the effective date of the Law of Ukraine On Currency and Currency Operations.