31 March 2014
Update: Restrictions on foreign currency transactions and measures aimed at stabilising Ukrainian financial sector

Effective as of 28 March 2014, the National Bank of Ukraine (the “NBU”) has adopted Resolution No. 172 “On regulation of activity of financial institutions and carrying out of foreign currency transactions” (the “Resolution 172”) introducing certain restrictions on transactions in foreign currency as well as measures enhancing stability of banking and financial activities. The Resolution 172 cancelled the previous NBU Resolution No. 49 “On measures in respect of banking activities and carrying out of foreign currency transactions” governing the similar issues.

Restrictions on purchase of foreign currency

According to the Resolution 172, Ukrainian residents are prohibited from any early repayment of any loans, credits or financial aid raised from foreign lenders/donors in any foreign currency (including in case of entry into any amendment agreement shortening maturity of any such borrowings). Such prohibition applies to early repayment by Ukrainian residents of principal, interest and any other payment obligations under credit, loan facility arrangements and/or financial aid agreements, in each case with foreign lenders/donors.

Purchase of foreign currency for non-commercial transactions of individuals

The NBU has altered a monthly limit of the total amount of foreign currency that may be purchased by an individual for the purposes of transfers of FX funds abroad under any non-commercial transactions. For Ukrainian residents, such limit currently amounts to an equivalent of UAH 15,000 (without provision of supporting documentation) and to UAH 150,000 (subject to provision of supporting documentation). Non-resident individuals may transfer FX funds abroad within the abovementioned limits subject to provision of supporting documentation, irrespective of the amount of transfer. The aforesaid limits, however, do not apply to certain types of non-commercial transactions, such as, among others, payment for education abroad, medical treatment abroad and transfer of FX funds purchased for UAH received as salary by foreign residents employed in Ukraine.

Withdrawal of cash and conversion of cash funds by individuals

The banks are now permitted to purchase FX cash funds from individuals without verification of their identification documents provided that the amount of such transaction does not exceed UAH 150 000. Purchase of FX funds (in cash) by individuals may be made in the amount not exceeding UAH 15 000 per one day.

The NBU has preserved the requirement for the banks not to disburse to their clients any foreign currency funds (in cash) in excess of an equivalent of UAH 15 000 per day per one client calculated at the official FX exchange rate established by the NBU. This requirement 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 Ukraine or outside of Ukraine.

Minimum period for purchase of foreign currency

The NBU has shortened the minimum period for purchase of FX funds by Ukrainian banks under instructions of their clients (individual entrepreneurs, legal entities and representative offices of foreign entities). Currently, any such purchase of FX funds shall be made not earlier than on the third (3rd) banking day after submission of the relevant instruction and transfer of UAH funds to an interim account of the bank and starting from 1 April 2014 such period is shortened to two (2) banking days. The banks, however, are prohibited to grant loans/advances to their client in case any such client is short of UAH funds for the purposes of purchasing the requested amount of FX funds due to FX rate volatility. Such foreign currency purchase transactions should be effected by the banks only within the UAH amount transferred by the respective client for such purposes.

The above minimum period requirement does not apply to purchase of foreign currency funds for the purpose of payment of interest under foreign currency denominated credit/loan/facility agreements.

The NBU has also cancelled its previously imposed prohibition for Ukrainian banks to perform FX purchase transactions on SWAP terms and FX forwards; however, non-deliverable FX transactions remain prohibited.

New regulations in respect of banking activity

The NBU has cancelled previously established zero rate on provisioning by Ukrainian banks in respect of FX funds raised from any foreign residents.

The requirement regarding early repayment by the banks of foreign denominated deposits in UAH remains in force. The NBU has suspended any issuance of savings (deposit) certificates by Ukrainian banks. Payments under previously issued savings (deposit) certificates may be made only via wire transfer of funds to the bank accounts of the owners of such certificates.

The Resolution 172 shall remain effective until 1 May 2014.