NATIONAL BANK OF UKRAINE (NBU) EXTENDS SERIES OF SEVERE RESTRICTIONS ON BUSINESS CURRENCY TRANSACTIONS

U.S.-Ukraine Business Council (USUBC),
Wash, D.C., Tue, June 9, 2015 

USUBC is receiving a large number of complaints from membersabout the major over regulation of private business by the NBU. Business leaders tell USUBC the NBU has been for many years and stillis one of their main problems in Ukraine.  The NBU hascreated huge problems for them with their far too many permanent andtemporary restrictions.  Business is difficult enough in Ukraine now andbusiness does not need the added problem of the NBU. 

The President/CEO of a leading business in Ukraine toldUSUBC last week the restrictions of the NBU are very painful, very substantialin terms of increasing their costs and reducing the ease of doingbusiness, hurts their ability to be competitive and is a large influentialnegative influence in their business.  A businessman from the USA, inUkraine last week for the large agribusiness forum and farm machinery show saidthe regulations of the NBU is a large factor in the reduction of theirability to provide Ukrainian farmers with the latest farm machinery...a lossfor Ukraine and for the USA. 

The National Bank of Ukraine (NBU) get high marks for theirwork the past few months to do their number one job....that of protecting thevalue of the people's money by correcting the serious errors and crimes ofthe past.  The NBU also get high marks for their work to stabilize andimprove the banking system and reduce corruption in private banks.  

The private business community hopes in the near future theNBU will start eliminating their long line of temporary and permanent, verydetailed restrictions on doing business in Ukraine, many which are a legacy ofSoviet days. The restrictions are out of date, no longer needed, and areholding back the recovery of private business operations in Ukraine. 

USUBC NOTE: The technical information below about the actions of the National Bank ofUkraine (NBU) was provided by USUBC members Asters, Dentons, EY and PwC.  

1. NBUEXTENDS THE TERM OF FOREIGN LENDER LOANS PREPAYMENT PROHIBITION (EXTENDED) 

Asters, Kyiv, Ukraine, Thu, June 4, 2014

KYIV -- By its Resolution No. 354, effective as of 4 June2015, the National Bank of Ukraine (the "NBU") extended the term ofthe prohibition of early repayment of loans provided by non-resident lendersuntil 3 September 2015 (inclusive).

According to Resolution No. 354, the NBU shall not register amendments to loanagreements with non-resident lenders reducing the term of fulfillment of theresident borrowers' obligations under such loan agreements or providing forearly fulfillment of obligations thereunder.

The prepayment prohibition shall not apply if:
1.  the prepaid amounts are used to increase the capital of the bankacting as the borrower;
2.  the prepayment is made from the proceeds of the loan extended underthe other cross-border loan agreement, provided that such a new loan agreementestablishes a later maturity date (in whole or in 

     part) compared to the previous loanagreement.

Furthermore, Resolution No. 354 reiterates, inter alia, the prohibition of:

1.  repatriation of proceeds received by foreign investors from the saleof Ukrainian issuers' securities outside the stock exchanges;
2. repatriation of proceeds received by foreign investors from the sale oftheir corporate rights in legal entities, which are not documented as shares,or via reduction of Ukrainian entities' charter capitals or

    withdrawal from such entities;
3.  repatriation of dividends to foreign investors;
4. making payments on the basis of NBU individual licenses (including investingoutside of Ukraine), except for the following:
5. crediting funds to legal entities' accounts opened abroad on the basisof NBU individual licenses;
6. residents' payments under the guarantees/suretyships issued inconnection with the loans provided by the international financial institutionsor the financing involving foreign export credit agencies;
7. local business entities' single or periodical payments on account ofadmission or members' fees in the foreign currency to maintain the operation ofthe foreign legal entities.

Previously, the aforementioned prohibitions were established by Resolution No.160 as of 3 December 2014, which is no longer in effect.

LINK: http://www.usubc.org/site/member-news/nbu-extends-the-term-of-foreign-lender-loans-prepayment-prohibition-extended

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2. NEW RESOLUTIONS NO. 354AND NO. 355 OF THE BOARD OF THE NATIONAL

BANK OFUKRAINE (“NBU”) DATED 3 JUNE 2015 ENTER INTO FORCE AS OF 4 JUNE 2015

Dentons, Kyiv, Ukraine, Wed, June 3, 2015

KYIV-- Resolution No. 354 was adopted to replace the earlier“anti-crisis” Resolution of the NBU No. 160  dated 03 March 2015, asamended, that expires on 3 June 2015. As a general matter, the Resolutionprolongs the previously effective anti-crisis measures.

THE PROLONGED MEASURES INCLUDE, AMONG OTHERS,THE FOLLOWING:

1.      The mandatory sale of 75 percent offoreign currency proceeds received from abroad by legal entities (exceptbanks), individual entrepreneurs, and foreign representative offices (exceptfor official

        (diplomatic)representative offices).
2.      The restriction on cross-border payment ofdividends to foreign investors.
3.      The restriction on early repayment under loanagreements between Ukrainian borrowers and foreign creditors (subject tocertain exceptions).
4.      Prohibition for banks from providing loans innational currency (including prolongation of previously provided credit lines),if such loans are secured by pledges of funds in foreign currency.
5.      With certain exceptions, banks are stillprohibited from purchasing foreign currency for clients (except for privatepersons), that have their own foreign currency funds (either on current bankaccounts

          ordeposit accounts in banks).
6.      Additional documents still must be providedfor purchase/payments in foreign currency exceeding US$50,000. In particular,for import operations, these include a certificate from the State Fiscal

         Serviceof Ukraine confirming no indebtedness in respect of tax payments.
7.      Banks are prohibited from the purchase and transferof foreign currency to foreign investors in certain cases concerning the returnof capital (e.g. a decrease of a company’s charter capital or the

         foreigninvestor’s withdrawal as a participant / shareholder in a company.)
8.      Certain restrictions have been prolonged inrespect of transactions for the purchase of precious metals.

AMONG THE NEW RESTRICTIONS, WE NOTE THEFOLLOWING:

1.      Restriction for banks to buy foreigncurrency on behalf of their clients-residents, which have on their bank accountfunds in foreign currency, will affect only clients which have more thanUS$25,000

         (inequivalent by official exchange rate). Previously such limit equaled US$10,000.
2.      Increasing of limit of cash withdrawal throughATM or cash departments of the banks from the previous threshold of UAH 150,000to UAH 300,000.

RESOLUTION NO. 354 REMAINS IN FORCE UNTIL 3SEPTEMBER 2015.

Resolution No. 355 also introduces certain changes to existingrestrictions regarding currency operations. In particular, Resolution No.355raises the threshold for obtaining a price evaluation act for the payment ofservices abroad from the previous threshold of €25,000 to €50,000.

LINK: http://www.usubc.org/site/member-news/new-resolutions-no-354-and-no-355-of-the-board-of-the-national-bank-of-ukraine-nbu-dated-3-june-2015-enter-into-force-as-of-4-june-2015

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3. THE NATIONAL BANK OFUKRAINE EXTENDS CURRENCY

CONTROLLIMITATIONS WHILE LOOSENING CERTAIN OF THEM

EY, Kyiv, Ukraine, Mon, June 8, 2015

KYIV -- On  3 June the Board of National Bank of Ukraine(NBU) adopted the Resolution No. 354 and No. 355 which took effect on  4June 2015.
Resolution No. 354 extends until 3 September 2015 effect of a number of previouslyestablished temporarily currency control restrictions ( in particular, by theNBU’s Resolution No. 160 dated 3 March 2015).

AT THAT, RESOLUTION NO. 354 AND NO. 355 LOOSEN FOLLOWING LIMITATIONS:

1. Increase of threshold for state price examination
2. Increase of the most of available foreign currency blocking new purchase offoreign currency
3. Increase of the maximum UAN currency UAN cash withdrawal per day

TO READ THE WHOLE STORY:  http://www.usubc.org/site/files/EY_Legal_Alert_2015_06_04_Eng.pdf

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4. NBU PROLONGS CURRENCYCONTROL RESTRICTIONS

PwC, Kyiv, Ukraine, Fri, June 5, 2015 

KYIV-- On 3 June 2015 the National Bank ofUkraine (the “NBU”) prolonged effective currency control restrictions for 3months up to 3 September 2015. The currency control restrictions generallyremain the same*. However, the NBU provided certain reliefs:

•  Limit for withdrawal of UAH cash was increased up to UAH 300,000 perindividual per day**;
•  The threshold for service payments to non-residents, which requireprice expertise of the Foreign Markets Monitoring Centre was increased up toEUR 50,000 per year***.

We will continue to monitor the situation and keep you updated on the issue.
Please refer to our Flash-reports No. 13 as of 4 March 2015 and No. 10 as of 25February 2015.
NBU Resolution No. 355 dated 3 June 2015.
NBU Resolution No. 354 dated 3 June 2015.

LINK: http://www.usubc.org/site/files/FR24_05.06.15_Eng.pdf

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NEWS: For the latest news about Ukraine go to theKYIV POST website: www.KyivPost.com.

The Kyiv Post of theISTIL Group is a member of the U.S.-Ukraine Business Council(USUBC).  
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