Until June 3, 2015 currency restriction mode imposed almost six months ago by the Resolutions of the National Bank of Ukraine (hereinafter - the "NBU") № 540 dated August 29, 2014 and № 758 dated December 01, 2014, which are not effective as of today, will continue to operate. In early March, the NBU has adopted new Resolutions №160 and №161, which (i) expanded the list of previously established currency restrictions, and (ii) specified the procedure for advance payments on import operations, which we have reported on earlier.
(A) Major restrictions, extended by the NBU without specifications include:
- requirement to execute all settlements in foreign currency on foreign trade operations within 90 days;
- requirement on mandatory sale of 75% of foreign currency earnings received by the legal entities and private persons - entrepreneurs and foreign missions from abroad;
- banks are prevented from issuance of bearer savings certificates and the validity period of the registered certificates is limited to 6 months with early repayment prohibition;
- prohibition on purchase of foreign currency at the expense of loan funds;
- prohibition on early repayment of loans in foreign currency;
- prohibition on payments abroad in foreign currency on the basis of individual licenses of NBU, with some exceptions;
- prohibition on transfer of foreign currency abroad by private individuals under non-commercial operations in an amount exceeding the equivalent of UAH 15 000,00 per day. Non-residents may perform such operations only on the basis of documents confirming the source of funds;
- prohibition on transfer of foreign currency from current accounts opened in foreign currency by private individuals abroad under non-commercial operations in an amount exceeding the equivalent of UAH 15 000,00 per day and UAH 150000,00 per month without supporting documents, with some exceptions;
- prohibition on cash withdrawal in foreign currency from current and deposit accounts in the amount exceeding the equivalent of UAH 150 000,00 per day in and outside of Ukraine;
- prohibition on cash sale by Ukrainian banks exceeding the equivalent of UAH 3 000,00 per day.
(B) Major restrictions, specified by the NBU include:
- prohibition on repatriation of proceeds derived by foreign investors from sale of securities of the Ukrainian issuers will now apply not only to sale of such securities outside of stock exchanges, but also to such sale on stock exchanges. Herewith, such restriction does not cover proceeds derived by from sale of debt securities of such issuers on stock exchanges;
- prohibition on payment of dividends to foreign investors will now apply to all types of dividends, including those on securities which are traded on stock exchanges;
- prohibition on repatriation of proceeds derived by foreign investors from sale of corporate rights in the Ukrainian companies will now apply to the amounts of funds released from reduction of the authorized capital of such Ukrainian companies and foreign investors’ withdrawal from participation in the Ukrainian companies;
- letter of credit as a mandatory form of settlements in advance payments for supply of vital goods (“emergency import”) have been cancelled until April 3, 2015, even for the vital goods valued at greater than the equivalent of USD 500,000.00;
- NBU has extended the list of documents required for submission to the NBU with regard to the currency purchase and remittance, namely (а) a certificate from the fiscal service must now be provided to confirm that the taxpayer has no debts to the budget – for currency purchase in the amount exceeding an equivalent of SD 50,000.00; (b) a price examination certificate must now be provided in respect of advance payments for imported services and works valued at greater than the equivalent of USD 25,000.00); (c) a certificate from the National Securities and Stock Market Commission is now required to confirm that the transaction of sale of non-governmental debt securities has no features of a sham transaction, etc.
(C) Major restrictions which were additionally imposed by the NBU, include:
- prohibition on national currency lending against the pledge of property rights to funds held in foreign currency accounts;
- prohibition on purchase of foreign currency, in case the foreign currency funds are available at the deposit or current accounts of legal entities exceeding an equivalent of USD 10,000.00, with few exceptions;
- prohibition on purchase of government bonds at the expense of funds held on the investment accounts except for the funds, accumulated from the sale of foreign currency or government bonds or as the proceeds from them or their redemption;
- prohibition on purchase of precious metals for non-cash UAH funds more than once a week and for a total weight exceeding XAU 3.216;
- NBU right to suspend any currency transaction which, in its opinion, involves higher risk of illicit purposes, and to request any additional documents validating the transaction.
NBU is making promises to abolish such restrictive stabilization measures, in case the situation on the financial and monetary market of Ukraine goes back to normal. However, the forecasts of market participants are far from being optimistic and do not encourage hopes for early improvements in the foreseeable future. In the meantime, business must take into account mentioned limitations and structure relations with foreign partners accordingly, including for the purposes of minimizing currency and contractual risks, connected with disruptions in performing monetary obligations in timely and due order.