NBU Extends Capital Control Restrictions

Baker&McKenzie, Kyiv, 
Ukraine, Tue, Sep 22, 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 beconducted within 90 days;

(b)          the mandatoryrequirement for legal entities and representative offices to sell 75% of theforeign currency proceeds received from abroad (subject to certain exceptions);

(c)          the restriction onrepaying cross-border loans prior to their maturity date (subject to certainexceptions).

(d)          the limit on themaximum amount of foreign currency that one bank can sell in cash per capitaper day, which is the equivalent of UAH3,000. This restriction does not applyif the foreign currency is purchased to repay loans denominated in foreigncurrency;

(e)           limitationsconcerning interbank market foreign currency and bullion purchase transactionswhich are subject to “tod”, “tom”, “spot” and “forward” terms and prohibitionfor authorized banks to carry out their own derivative transactions on a stockexchange where the underlying asset is a foreign currency or its exchange rate;

(f)           prohibition foran authorized bank to provide clients with loans in UAH (including underexisting facilities or by way of prolongation of loans  issued earlier)secured by pledge over property rights to foreign currency funds in bankaccounts; and

(g)          prohibition for anauthorized bank, subject to certain exceptions, to purchase foreign currencyfor clients that are legal entities or individual entrepreneurs, if they haveavailable foreign currency in bank accounts with any Ukrainian bank.
 

2.       NBU retained the earlier prohibition concerning certain transactions in foreigncurrency and

confirmed that the followingtransactions are prohibited:

(a)          repatriation ofproceeds from (i) the sale of securities of Ukrainian issuers (except for salesof 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 entityor exit of a foreign investor from the same;

(b)          repatriation ofdividends to foreign investors;

(c)         payments permitted by individual licenses issued by the NBU (subject tocertain exceptions);

(d)          purchasing of foreigncurrency by an authorized bank upon clients’ instructions using clients’ fundsin UAH received as a loan except for the purpose of repayment of a consumerloan by an individual received from the bank in foreign currency; and

(e)          making of across-border advance payments (subject to certain exceptions) by an authorizedbank in foreign currency under import contracts in excess of USD 50,000 withoutprior approval of the NBU.
 

3.       NBU clarified and eased some of the earlier restrictive measures, inter alia:
 

(a)         an authorized bank may not untag the export operation from its currencycontrol only if its client offsets its mutual obligation with the relevantcounterparty (i) in a foreign currency of 1st group of currencies and russianrubles and (ii) other currencies, if the amount of the offset obligation underone export contract exceeds USD 500,000; and
(b)          authorized banks werepermitted to facilitate withdrawal of higher amounts of cash from deposit andcurent account in foreign currency per client, i.e., up to equivalent of UAH20,000.
 

4.       NBU introduced additional restrictive measures:
 

(a)         authorized banks may not carry out a payment in UAH upon its client’sinstruction into a correspondent account of a non-resident bank in favor of therelevant non-resident counterparty, if the respective funds in UAH werereceived by the client as a loan;

(b)          authorized banks maynot purchase foreign currency upon client’s instruction and/or transfer fundsin UAH in favor of a non-resident through a correspondent account of anon-resident bank (subject to certain exceptions) if such purchase or paymentis carried out to settle under (i) an import contract where the respectivegoods were cleared by customs prior to 1 January 2014, or (ii) a contract wherethe payor and/or payee were replaced by a new counterparty.

These measures were implemented when on 3 September 2015 the NBU adopted newregulation (“ResolutionNo. 581”) with effect from 4 September 2015, which introducednew currency control restrictions and extended the application of certainexisting currency control restrictions previously set by NBU Resolution No.354, dated 3 June 2015. Some other restrictions introduced by the NBU on 23February 2015 also remain in place.

Conclusion

The extension of these capital and currency control restrictions andintroduction of the new controls was prompted by the high volatility of the UAHand is aimed at preventing capital flight from the Ukrainian financial system.
If you would like to discuss any aspect of the new measures please feel free tocontact us.