NBU Extends Capital Control Restrictions
Baker&McKenzie, Kyiv, Ukraine,
Wed, Dec 16, 2015
What Measures Apply?
1. The NBU has extended, inter alia, the application of the following measures:
(a) settlements under transactions for the export/import of goods are to be conducted within 90 days;
(b) the mandatory requirement for legal entities and representative offices to sell 75% of the foreign currency proceeds received from abroad (subject to certain exceptions);
(c) the restriction on repaying cross-border loans prior to their maturity date (subject to certain exceptions).
(d) the limit on the maximum amount of foreign currency that one bank can sell in cash per capita per day, which is the equivalent of UAH3,000. This restriction does not apply if the foreign currency is purchased to repay loans denominated in foreign currency;
(e) limitations concerning interbank market foreign currency and bullion purchase transactions which are subject to “tod”, “tom”, “spot” and “forward” terms and prohibition for authorized banks to carry out their own derivative transactions on a stock exchange where the underlying asset is a foreign currency or its exchange rate;
(f) prohibition for an authorized banks to carry out a payment in UAH upon its client’s instruction into a correspondent account of a non-resident bank in favor of the relevant non-resident counterparty, if the respective funds in UAH were received by the client as a loan;
(g) prohibition for authorized banks to purchase foreign currency upon client’s instruction and/or transfer funds in UAH in favor of a non-resident through a correspondent account of a non-resident bank (subject to certain exceptions) if such purchase or payment is carried out to settle under (i) an import contract where the respective goods were cleared by customs prior to 1 January 2014, or (ii) a contract where the payor and/or payee were replaced by a new counterparty;
(h) prohibition for an authorized bank to provide clients with loans in UAH (including under existing facilities or by way of prolongation of loans issued earlier) secured by pledge over property rights to foreign currency funds in bank accounts; and
(i) prohibition for an authorized bank, subject to certain exceptions, to purchase foreign currency for clients that are legal entities or individual entrepreneurs, if they have available foreign currency in bank accounts with any Ukrainian bank.
2. NBU retained the earlier prohibition concerning certain transactions in foreign currency and
confirmed that the following transactions are prohibited:
(a) repatriation of proceeds from (i) the sale of securities of Ukrainian issuers (except for (i) sales of state treasury bonds conducted on or outside of a stock exchange and (ii) sales of other bonds conducted on a stock exchange), (ii) the sale of corporate rights (other than shares) or (iii) decrease of the charter capital of a legal entity or exit of a foreign investor from the same;
(b) repatriation of dividends to foreign investors;
(c) payments permitted by individual licenses issued by the NBU (subject to certain exceptions);
(d) purchasing of foreign currency by an authorized bank upon clients’ instructions using clients’ funds in UAH received as a loan except for the purpose of repayment of a consumer loan by an individual received from the bank in foreign currency; and
(e) making of a cross-border advance payments (subject to certain exceptions) by an authorized bank in foreign currency under import contracts in excess of USD 50,000 without prior approval of the NBU.
3. NBU clarified and eased some of the earlier restrictive measures, inter alia:
(a) the NBU has extended the list of exempted transactions which are not subject to the mandatory requirement for legal entities, individual entrepreneurs and representative offices to sell 75% of the foreign currency proceeds received from abroad with the following transactions:
(i) receipt of a loan from a foreign creditor by Ukrainian borrower provided: (a) it was transferred directly to the account of non-resident exporter according to the cross-border trade contract, and (b) was issued with participation of a foreign export credit agency;
(ii) receipt of a collateral for a bid from a non-resident participating in a public procurement transaction.
(b) the NBU has clarified that cashless settlements preformed by individuals for personal purposes (payments for goods and services outside of Ukraine) using electronic means of payment are not subject to temporary limitations for cross-border transfers.
These measures were implemented when on 4 December 2015 the NBU adopted new regulation (“Resolution No. 863”) with effect from 5 December 2015, which extended the application of certain existing currency control restrictions previously set by NBU Resolution No. 581, dated 3 September 2015. Some other restrictions introduced by the NBU on 23 February 2015 also remain in place.
The extension of these capital and currency control restrictions was prompted by the high volatility of the UAH and is aimed at preventing capital flight from the Ukrainian financial system.
If you would like to discuss any aspect of these developments please feel free to contact us.
This LEGAL ALERT is issued to inform Baker & McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.