On 23 August 2012 amendments to the Regulation of the National Bank of Ukraine (the "NBU") on the procedures and conditions for foreign currency trading came into effect. The changes were approved by the NBU Board on 19 July 2012 (the "Amendments"). The Amendments left a number of questions open for the banks. Accordingly, NBU explained some of the changes introduced by the Amendments in its letter of 25 September 2012 (the "Clarification").

In the Clarification NBU outlines four groups of changes that banks need to take into account in their work.

1. Banks are forbidden to purchase foreign currency on their own account for one month after breaking any NBU reserve requirements.
2. Banks are expected to purchase or exchange foreign currency for each foreign trade contract (including trade in services) through the one and the same entity.

   The banks can still purchase or exchange foreign currency to make advance payments to non-residents under foreign trade contracts but they must comply with the one-entity requirement in doing so.

   NBU clarifies that to fulfill their obligations under the foreign trade contracts residents may transfer their own funds in foreign currency from their current accounts in authorized banks, which do not trade in foreign currency.

   Also, it should be noted that clients must specify in customs declarations the details of the bank through which they will purchase or exchange currency. However, if a client changes a bank which services one of the client's foreign trade contracts, the new servicing bank may use the previous servicing bank's written notice containing information from the register of customs declarations.

3. Where a new bank takes over as the servicing bank for a foreign trade contract, the former servicing bank through which payments were previously made under the contract, is required to provide information on the outstanding balance of the resident and the volume of currency purchased, exchanged or transferred through the bank under the contract. However, even after providing this information the former servicing bank must maintain supervision of foreign exchange transactions of its customer and compliance with the 180-day time-limit for the completion of payments.
4. With some exceptions, authorized banks have the right to use the data from the electronic register of customs declarations to purchase foreign currency.

For further information please contact senior partner Armen Khachaturyan
and associate Ivan Mykhalchuk