On 4 December 2015, the National Bank of Ukraine (the “NBU”) issued Regulation No. 863 “On Regulating the Situation in the Monetary and Foreign Currency Markets of Ukraine” (“Regulation No. 863”). Regulation No. 863 extends most of the restrictions previously imposed by Regulation No. 581 dated 3 September 2015 (“Regulation No. 581”) and will remain in effect until 4 March 2016. Regulation No. 863 aims to ensure the stability of the Ukrainian national currency by limiting foreign currency cash outflow.
The following restrictions stay in place:
- 90-day timeframe for export/import transactions (in the case of import transactions, goods/services must be received by a Ukrainian importer within 90 days after the date of the advance payment, and in the case of export transactions foreign currency proceeds should be received by a Ukrainian exporter within 90 days after the date of delivery of goods/services).
- Requirement for the mandatory sale of 75% of foreign currency proceeds received from abroad by legal entities, representative offices and businesses (subject to certain exceptions, including a new exception for loans which involve export credit agencies).
- Prohibition on Ukrainian residents making early payments under cross-border loan agreements including under any amendments to such agreements (subject to certain exceptions).
- Prohibition on assignment of foreign currency loans as follows: (a) replacement of a lender and/or a borrower under cross-border loan agreements; and (b) assignment of loans by Ukrainian lenders to non-resident lenders under foreign currency loan agreements entered into between residents (subject to certain exceptions).
- Prohibition on purchasing and transferring foreign currency under the following transactions:
- repatriation of funds received by foreign investors as a result of: (a) sales of corporate rights in Ukrainian entities (other than shares); (b) reduction of charter capital; or (c) exit of foreign investors from companies;
- repatriation of dividends to be paid to foreign investors; and
- transactions authorised by individual NBU licences, although this is subject to certain exceptions. In particular, this prohibition does not apply to the following transactions: (a) legal entities depositing foreign currency funds into bank accounts abroad; (b) payment by a guarantor (surety) under a guarantee (suretyship) securing obligations under a loan granted by an international financial institution or export-import agency; (c) transfer of foreign currency by legal entities in an amount not exceeding USD 50,000 (or the equivalent of this amount in other currencies) per calendar month.
- Prohibition on Ukrainian banks discontinuing control over their clients’ export operations on the basis of documents confirming a set-off between the parties (subject to certain exceptions).
- Requirement to submit certain additional documents to the NBU (in addition to the standard package of documents) in the event of the transfer /purchase of foreign currency in an amount exceeding USD 50,000.
- Prohibition on purchasing foreign currency as per a client’s request under import operations if: (i) the imported goods were cleared by Ukrainian customs authorities before 1 January 2014 and (ii) a debtor/creditor under a foreign economic contract was replaced (subject to certain exceptions).
- Restrictions on purchasing foreign currency. In order to buy foreign currency, legal entities and private entrepreneurs are required to credit the relevant amount in UAH to the bank's internal (analytic) account. The bank will then buy foreign currency within 4 business days of the client’s transfer. Further, if a foreign currency transaction exceeds USD 50,000, a bank must include it in the register of transactions submitted to the NBU together with scanned copies of the documents that serve as the basis for the transaction. Such transaction can proceed, if not rejected by the NBU, not earlier than on the fourth business day after the day of the register’s submission to the NBU.
- Prohibition on purchasing and transferring foreign currency in order to repatriate funds received by foreign investors as a result of sales of securities issued by Ukrainian entities (with an exception for debt securities sold on the Ukrainian stock exchange and with a new exception for Ukrainian state bonds sold both on and outside the Ukrainian stock exchange).
Regulation No. 863 imposes the following new restriction:
- The NBU is now entitled to reject the purchase or transfer of foreign currency abroad if (i) a bank is considered by the NBU to carry out risky activities or (ii) the nature or potential implications of financial transactions carried out by a bank, in the NBU’s opinion, are likely aimed at money laundering, financing of terrorism or the proliferation of weapons of mass destruction.
Legislation: Regulation of the National Bank of Ukraine “On Regulating the Situation in the Monetary and Foreign Currency Markets of Ukraine” No. 863 dated 4 December 2015