5 March 2015
Legal Alert: Extension of the Restrictions of the National Bank of Ukraine Aimed at Stabilisation of the Situation on Ukrainian FX Market

The National Bank of Ukraine (the “NBU”) has adopted the resolution No.160 dated 3 March 2015 (the “Resolution 160”) aimed at stabilisation of the situation on Ukrainian FX market. According to Resolution 160, the NBU has extended most of the existing restrictions set out in the NBU’s previous similar resolution No. 758 as of dated 1 December 2014 and introduced several additional restrictions.

Resolution 160 is effective from 4 March 2015 until 3 June 2015 (inclusive) and provides (preserves, as the case may be), among others, the following restrictions:

FX Mandatory Sale Requirement. The NBU has preserved the temporary requirement for mandatory conversion of 75% of foreign currency revenues into UAH with the scope and types of foreign currencies and FX transactions subject to this requirement remaining the same.

Early Repayment of Loans. The NBU has prolonged the restriction on early repayment of loans (or financial aid) raised by Ukrainian residents from foreign lenders/donors in any foreign currency (including in case of entry into any amendment agreement shortening maturity of any such borrowings).

Restriction on Certain Money Transfers. NBU has generally prolonged and toughened the restrictions on carrying out of the following money transfers out of Ukraine:

  • transfers by foreign investors of funds obtained as a result of OTC sale of Ukrainian local debt securities or sale of shares and ownership interests in legal entities, decrease of share capital of legal entities or withdrawal by foreign participants from Ukrainian companies;
  • all transfers by foreign investors of dividends;
  • transfers of funds on the basis of individual licences issued by the NBU (subject to certain exemptions, such as transfers on the basis of NBU licences for placement of funds on foreign bank accounts and NBU licences for making by Ukrainian residents-guarantors (or sureties) of payments under borrowings obtained from to international financial organisations and/or with participation of foreign export-credit agencies).

FX Purchase Restrictions. The NBU has prohibited Ukrainian banks to purchase FX funds upon instructions of their clients (other than private individuals) if such clients hold their own FX funds on accounts with Ukrainian banks. Such restriction shall not apply if the aggregate amount of clients’ funds (in all Ukrainian banks) does not exceed the equivalent of USD 10,000 (excluding pledged FX funds (property rights to such funds), deposits placed prior to 4 March 2015, or funds held with banks declared by the NBU as insolvent).

Ukrainian banks could generally purchase FX funds under instructions of their clients not earlier than on the forth (4th) banking day after submission of the relevant instruction and transfer of UAH funds to an interim account of the bank.

The NBU also prohibited Ukrainian banks to grant loans in UAH (or to extend existing UAH denominated loans) if such loans are to be secured by property rights for FX funds placed on accounts with Ukrainian banks.

The NBU has also kept the established limitation of amount of cash foreign currency (the equivalent of UAH 3,000) which Ukrainian banks are allowed to sell to an individual per one banking day.

Verification of FX transactions by the NBU. In addition to recently introduced limitations on advances payable by Ukrainian importers to their foreign suppliers1, NBU has also introduced similar verification requirements for all other payments to be made outside of Ukraine as well as for the respective purchase of foreign currencies. In particular, a Ukrainian bank is now prohibited from purchasing foreign currency and processing of any payments outside of Ukraine (upon instruction of its client) in case the NBU notifies such Ukrainian bank on its “refusal to approve” such payment/purchase of foreign currency. For the purposes of approval of such payment/currency purchase transactions by the NBU, Ukrainian banks are required to submit to the NBU a register of such anticipated transactions. Depending on the amount of the relevant transaction or its type, copies of supporting documents (including certain documents specifically indicated by the NBU) should also be submitted. The NBU is also entitled to request additional documents at its own discretion.

Payments for Ukrainian state bonds. The NBU prohibited purchases of Ukrainian state bonds by foreign investors as long as payments for such bonds are made out of funds placed at UAH investment accounts of such investors. This restriction, however, does not apply to purchase of Ukrainian state bonds by foreign investors if such purchase is made out of funds received as a result of sale of foreign currency by foreign investor on Ukrainian FX market and/or as a result of previous sale of Ukrainian state bonds or receipt of interest or principal payments thereunder.

Withdrawal of Cash from Bank Accounts. The NBU has prolonged the requirement under which Ukrainian banks may not disburse to their clients any FX funds (in cash) in excess of an equivalent of UAH 15 000 per day per one client. As previously applied, this restriction (subject to certain exceptions) applies to withdrawal of cash from current and deposit accounts (regardless of number of accounts of a client in the respective bank) and irrespective whether such withdrawal is made in or outside of Ukraine.

The NBU has also kept the requirement whereby Ukrainian banks should limit the withdrawal of cash funds in UAH from current and deposit accounts of clients to 150 000 UAH per one day per client (with certain exceptions).

Non-Commercial FX Transactions. The NBU has preserved a monthly limit of the total amount of FX funds that may be transferred by an individual under any non-commercial transactions. Such limit (subject to certain exceptions) currently amounts to an equivalent of UAH 15,000 (if no supporting documentation provided and/or if no current account opened) and to UAH 150,000 (for payments out of a current account subject to provision of supporting documentation).

Restrictions on Purchase of Bank Metals. The NBU has introduced the new weekly limitation of amount of bank metals which Ukrainian banks are allowed to sell if payment for such bank metals is made with the use of non-cash UAH funds. In particular, a Ukrainian bank will not be able (subject to certain exceptions) to sell to a Ukrainian company or a private entrepreneur bank metals in the amount exceeding the equivalent of 3.216 of troy ounces.

Certain Restrictions on Activities of Ukrainian Banks. The NBU has also preserved the restrictions relating to issuance of savings (deposit) certificates by Ukrainian banks, as well as repayment thereof.

In addition to that, the NBU also limited daily volumes of foreign currencies that may be purchased by a Ukrainian bank for its own purposes on interbank market. Such daily volumes shall not exceed the aggregate amount of foreign currencies sold by such Ukrainian bank on the same day plus certain threshold amount calculated as percentage of the banks’ regulatory capital. Ukrainian banks are also prohibited from carrying out their own transactions with derivative instruments where the underlying asset is a foreign currency or foreign exchange rate.

Ukrainian banks shall also, on a daily basis (i) report to the NBU on all the instructions to purchase FX funds received from their clients; and (ii) conduct monitoring of operations of clients on making payments and/or purchase of FX funds on Ukrainian interbank FX market.