Today, on 16 December 2016, Resolution No. 410 enters into force, with which the National Bank of Ukraine (the NBU) has extended currency restrictions that were imposed back in September 2014. This time the NBU has not displayed its usual optimism in such cases and defined the term of such restrictions not as a 3-month period, as all the previous times, but with reference to the adoption of a new resolution on the removal or adjustment of such restrictions. The only exception to the said rule is restrictions with a term of validity that may be determined exclusively by the laws of Ukraine. Actually, it means that the Ukrainians will have to live with currency restrictions they are already familiar with until the NBU recognizes that the banking system has reached a stable financial status.
The list of restrictions and their content remain unchanged as compared to Resolution No. 386 which was valid for the last three months.
Therefore, the following restrictions continue to be relevant:
- Early repayment of foreign currency loans to non-residents is prohibited; permission to change an interest payment period for such loans within 180 days is still allowed as well as to reduce the loan repayment period where such reduction is carried out for the purpose of debt restructuring by setting off claims for the principal loan amount as an additional contribution of a non-resident creditor to the authorized capital of a resident debtor during the authorized capital increase (conversion).
- It is prohibited to purchase and transfer foreign currency under individual NBU licenses if the sum of payment under such licenses exceeds USD 50,000.00 per month, with a few exceptions whose list, however, has not changed.
- Dividends shall be allowed to be paid only for the period of 2014 to 2015. The total amount of such payments during one calendar month shall still not exceed the greater of USD 1 mln or 10% of the total amount of payable dividends. If 10% of the total dividends exceed USD 5 mln, the monthly payment limit will be USD 5 mln. Payment of dividends for preceding periods or in larger amounts is still prohibited.
- It is prohibited to purchase and transfer foreign currency for the purposes of returning abroad the funds received from sale of Ukrainian issuers’ securities, corporate rights in Ukrainian entities, and funds received from Ukrainian entities’ capital reduction or as a result of withdrawal from participation in the same.
- It is prohibited to purchase foreign currency at the instruction of a resident client (other than an individual) who has foreign currency funds held in current and deposit accounts in an amount exceeding USD 25,000.00 or an equivalent thereof in any other currency. The limit amount does not include some funds whose list has been expanded only with foreign currency which shall be used for payment exclusively along with purchased foreign currency for the purpose of fulfilling obligations under import operations.
- As before, a termination of obligations under import and export transactions by means of set-off is not allowed.
- The daily limit for the issuance of foreign currency in cash from current and deposit accounts to one client remains unchanged and shall not exceed 250,000.00 in the UAH equivalent.
- 65% of foreign currency earnings shall be subject to mandatory sale.
- The maximum allowable period for settlements under export and import transactions as before shall not exceed 120 calendar days.
The last two of the aforementioned restrictions will be valid until 16 June 2017 due to the maximum period allowed by the applicable legislation.
As you can see, the predicted and expected removal of currency restrictions has not happened. However, considering the Concept of Changes in the System of Currency Regulation and Control, which was approved by the NBU in early December this year, where, among other things, currency liberalization was listed among the prospects of the NBU in the next year, we can only hope that eventually the situation will stabilize and limits will be lifted. We continue to monitor the situation and will inform about all significant changes introduced by the regulator in the money-and-credit and currency markets.