To balance out Ukrainian economy affected by the economic crisis in 2013 and 2014, the National Bank of Ukraine (“NBU”) imposed heavy currency control restrictions on FX cross-border payments. However, along with signs of economic recovery, during the past twelve months, the NBU took a number of regulatory steps demonstrating Ukraine’s willingness to ease existing barriers and encourage foreign investment inflow. By now, the NBU (i) substantially relaxed or fully removed currency control restrictions introduced during the period from 2013 to 2015 and (ii) improved its certain regulations, as compared to those in place in 2013.

Below we summarise key recent currency controls developments:

Cross-border loans

The NBU:

1.  allowed foreign lenders to initiate the registration of the change of a foreign lender under FX cross-border loans (“FX loans”) without involving a Ukrainian borrower – which should result in more active transfers of non-performing FX loans

2.  excluded export-credit agency (“ECA”) premium or similar costs from the NBU`s maximum interest rate limitation applicable to the FX loans – which should facilitate the attraction of the ECA-backed financing by Ukrainian borrowers;

3.  permitted early repayment of the FX loans:

• extended to Ukrainian banks
• extended to Ukrainian borrowers by a foreign bank
• extended to Ukrainian borrowers by a foreign lender provided that international financial organisation (e.g., EBRD or IFC) is a shareholder of such Ukrainian borrower or foreign lender
• extended by international financial organisations or covered by ECA guarantees
• refinanced by FX loans with longer maturity

Export and import contracts

The NBU extended the settlement period under export and import contracts to the period of 180 days.

Furthermore, the NBU abolished the requirement for a price evaluation act from the State Centre for Monitoring of External Commodity Markets allowing Ukrainian residents to make cross-border payments for works and services in the amount exceeding EUR50,000.

Operations with foreign currency

The NBU reduced the requirement for the mandatory FX sale to 50 per cent. Aside from that, the NBU lifted the prohibition to purchase FX funds by Ukrainian companies having FX account in excess of USD100,000.

Additionally, starting from 26 June 2017, the NBU allowed Ukrainian companies to hedge FX exchange risks by using currency forward for the exchange of any foreign currency without any limitations on duration of such forward transactions. Previously, such forward transactions were allowed only in respect of the freely covertible currencies and their term could not exceed 365 days.

Placement of FX funds by Ukrainan individuals outside of Ukraine

The NBU revisited the longstanding individual licensing regime in relation to the use of foreign bank accounts by Ukrainian individuals. As a result, Ukrainian individuals can now keep FX funds originated outside of Ukraine at their foreign bank accounts or use them for making foreign investments outside of Ukraine without a need to obtain an individual license from the NBU (“NBU licenses”).

Although Ukrainian individuals still need to obtain the NBU licenses for the transfer of FX funds from Ukraine abroad, starting from 3 July 2017, the NBU established an electronic system for obtaining such licenses through Ukrainian servicing banks allowing to transfer FX funds in the amount up to USD50,000 per year. This novelty should simplify and speed-up the issuance of the NBU licenses to Ukrainian individuals.

Repatriation of dividends and investments

The NBU allowed repatriation of dividends abroad for the period between 2014 and 2016 years. The amount of such dividends cannot exceed USD5 million per one calendar month.

Additionally, the NBU allowed foreign investors to repatriate proceeds received from the following:

1.  sale of debt and equity securities of Ukrainian issuers

2.  sale of participatory interest in Ukrainian companies

3.  withdrawal from equity or decrease of charter capital of Ukrainian companies

Repatriation of investments is subject to a monthly cap of USD5 million.