The National Bank of Ukraine (NBU) has published for public discussion three of the seven draft regulatory documents that will form the basis of the new liberal and transparent currency regulation system provided for by the Law of Ukraine On Currency and Currency Operations.
In September, the NBU presented the draft currency regulation framework comprising seven new key regulatory documents:
- No. 1: the FX market structure and rules for trading in foreign currency and precious metals
- No. 2: the procedure of foreign currency purchase and transfer within Ukraine and abroad
- No. 3: cross-border movement of currency values (cash in domestic and foreign currencies, precious metals) by banks, legal entities, and individuals
- No. 4: a general list of safeguard measures that may be applied by the NBU, criteria and procedure for their implementation, terms of their extension and early termination
- No. 5: a list of implemented safeguard measures and procedure for their application (this is a temporary anti-crisis resolution)
- No. 6: other macroprudential instruments for stabilization of the money market, as well as the reporting system on debt currency operations
- No. 7: the procedure for meeting the settlements deadlines, established by the NBU.
hree of these resolutions, Nos. 1, 2, and 3, set the FX regulation norms, which will apply once Ukraine completes its transition to free currency operations on the principle ‘everything that is not explicitly forbidden by law, is allowed’ as provided for by the Law On Currency and Currency Operations. As the Law itself, these resolutions take partial effect on 7 February 2019. They will take full effect once favorable macroeconomic conditions are met and remain in effect thereafter. Until that time, the FX regulation will be carried out partially under temporary resolutions Nos. 5, 6, and 7.
Moreover, the temporary resolutions will become effective to protect the economy and the financial system from crises whenever the macrofinancial conditions meet criteria for the implementation of the safeguard measures (Resolution No. 4). However, once the macrofinancial stability is restored, the temporary resolutions will be cancelled, and the FX regulation will continue to be carried out under the permanent resolutions.
Overall, the proposed FX regulation framework includes the following innovations:
- Deregulation of cross-border investment. The business and households, which are now required to obtain licenses for investment abroad, will be able to make investments within the electronic limit that does not require obtaining any permits during the transitional period and, once the transition is complete, without any limits.
- The simplified procedure for household cross-border currency operations. In particular, the currency control over the payments abroad will be replaced by the post factum supervision of currency operations. The operations under UAH 150,000 will not require any supporting documentation, and the supervision of operations of a higher amount will be simplified.
Also, the limit on transfers abroad without opening an account and without documentation will be increased for individuals – from UAH 15,000 to the amount determined by the financial monitoring legislation of Ukraine (UAH 150,000 at present). This limit will be lifted for the operations via payment cards.
Furthermore, the mailing of cash by individuals will be regulated by the general rules of movement across the customs border, which will set the declaration requirement of EUR 10,000 and more instead of a current limit of EUR 300.
- New items on the list of currency operations available to bank customers. Bank customers will be able to pay for domestic government bonds both in hryvnia and foreign currency, as well as transact currency swaps. Both are possible only if the counterparty is a bank. In addition, customers will be able to not only purchase and sell but also exchange foreign currency cash via terminals and other banks’ software.
- The simplified procedure for foreign currency purchases in the interbank market for bank customers. For the operations under UAH 150,000, legal entities will not have to provide the supporting documents that are required as of now. Looking ahead, this approach will apply to all foreign currency purchases in the interbank market made by bank customers.
- Increased opportunities to conduct operations with precious metals. The companies of an appropriate specialization will be able to purchase precious metals without any limits and allowed to import and export them across the border (only banks have this right at present).
Individuals, in their turn, will be able to perform operations with precious metals within the limit determined by financial monitoring legislation of Ukraine that applies to FX operations (UAH 150,000 at present). Moving forward, the limit will be fully lifted for them as well.
Today, the first three permanent draft resolutions that aim to give the green light to FX operations were published. Please see the following links for draft resolutions:
- No. 1: the FX market structure and rules for trading in foreign currency and precious metals
- No. 2: the procedure of foreign currency purchase and transfer within Ukraine and abroad
- No. 3: cross-border movement of currency values (cash in domestic and foreign currencies, precious metals) by banks, legal entities, and individuals
Currently, the NBU is finalizing draft temporary resolutions Nos. 5, 6, and 7, which it intends to issue for public discussion within a month.
Please send your comments on the draft resolutions to [email protected] up to and including 20 November 2018.