8 December 2015
The NBU Reinforces FX Restrictions

The National Bank of Ukraine (the “NBU”) has adopted resolution No.863 dated 4 December 2015 (“Resolution 863”) aimed at stabilisation of the situation on Ukrainian FX market. The Resolution 863 shall be effective as of 5 December 2015 until 4 March 2016. According to the Resolution 863, the NBU has generally extended all of temporary restrictions introduced (or prolonged) under similar resolution of the NBU No.581 dated 3 September 2015 (as amended). At the same time, the NBU has slightly modified some of its previously introduced restrictions. Such modifications include the following:

Mandatory FX Sale RequirementThe NBU has extended the list of exceptions from Mandatory FX Sale Requirement. The following FX proceeds shall also be exempted from mandatory conversion into UAH: (i) funds paid by a non-Ukrainian participant of public procurement procedure as a deposit (security) for its tender bid; and (ii) funds, returned at the discretion of foreign (or intermediary) bank within 7 days from the date of payment made via Ukrainian bank.

Restriction on Purchase of FX FundsNBU has toughen the restriction limiting the ability of Ukrainian banks to purchase FX funds for their clients, if such clients have their own FX funds in the amount exceeding USD 25 000. In particular, the NBU broadened types of funds, which should be accounted in calculating of such amount of funds, including letter of credit, guarantee (counter-guarantee) coverage amounts.

Verification of FX Transactions by the NBUThe NBU has toughen the procedure of verification of FX transactions. Pursuant to Resolution 863, the NBU may refuse to approve certain transactions if it believes that such transactions will involve relevant Ukrainian bank in money laundering schemes or if such transactions relate to carrying out by relevant Ukrainian bank of “risky activities”.

Restrictions on Certain Money TransfersThe NBU has slightly liberated restriction applicable to certain money transfers. In particular, repatriation by foreign investors of funds obtained from sale of state bonds of Ukraine (irrespectively whether such sale is conducted on stock exchanges or OTC) is no longer restricted.

Below is the brief description of the key temporary restrictions introduced by the NBU prior to 5 December 2015, which were further prolonged under Resolution 863 subject to above modifications:

FX Mandatory Sale Requirement. 75% of foreign currency revenues are subject to mandatory conversion into UAH. Such requirement applies to revenues in hard currencies (such as USD, EUR, GBP, etc.) and RUB and is subject to several exemptions. Due to introduction of FX Mandatory Sale Requirement, export operations may not be settled by way of set-off (subject to certain exceptions).

Restrictions in Relation to Cross-Border Loans. The NBU restricts early repayment of loans (or financial aid) raised by Ukrainian residents from foreign lenders/donors in any foreign currency (including in case of entry into any amendment agreement shortening maturity of any such borrowings). In addition, introduction of amendments to cross-border loans providing for replacement of a lender/borrower is also prohibited (subject to certain exemptions).

Restriction on Certain Money TransfersCarrying out of the following money transfers out of Ukraine is restricted:

       transfers by foreign investors of funds obtained as a result of sale of Ukrainian securities (except for sale of debt securities on stock exchanges) and ownership interests in legal entities, decrease of share capital of legal entities or withdrawal by foreign participants from Ukrainian companies;

       all transfers by foreign investors of dividends;

       transfers of funds on the basis of individual licences issued by the NBU (subject to certain exemptions, such as transfers on the basis of NBU licences for placement of funds on foreign bank accounts or transfers on the basis of NBU individual licences of up to USD 50 000 per calendar month).

FX Purchase RestrictionsThe NBU has prohibited Ukrainian banks to purchase FX funds upon instructions of their clients (other than private individuals) if such clients hold their own FX funds on accounts with Ukrainian banks. Such restriction shall not apply if the aggregate amount of clients’ funds (in all Ukrainian banks) does not exceed an equivalent of USD 25,000.

In addition, Ukrainian banks could generally purchase FX funds under instructions of their clients not earlier than on the forth (4th) banking day after submission of the relevant instruction and transfer of UAH funds to an interim account of the bank.

Verification of FX transactions by the NBUA Ukrainian bank is prohibited from purchasing foreign currency and processing of any payments outside of Ukraine (upon instruction of its client) in case the NBU notifies such Ukrainian bank on its “refusal to approve” such payment/purchase of foreign currency. For the purposes of approval of such payment/currency purchase transactions by the NBU, Ukrainian banks are required to submit to the NBU a register of such anticipated transactions. Depending on the amount of the relevant transaction or its type, copies of supporting documents (including certain documents specifically indicated by the NBU) should also be submitted.

Payments for Ukrainian state bondsThe NBU prohibited purchases of Ukrainian state bonds by foreign investors as long as payments for such bonds are made out of funds placed at UAH investment accounts of such investors. This restriction, however, will not apply if such purchase is made out of funds received as a result of sale by foreign investor of FX funds on Ukrainian FX market and/or as a result of previous sale of Ukrainian state bonds or receipt of interest or principal payments thereunder.

Withdrawal of Cash from Bank AccountsUkrainian banks may not disburse to their clients any FX funds (in cash) in excess of an equivalent of UAH 20 000 per day per one client. This restriction (subject to certain exceptions) applies to withdrawal of cash from current and deposit accounts (regardless of number of accounts of a client in the respective bank) and irrespective whether such withdrawal is made in or outside of Ukraine. In addition, Ukrainian banks should limit the withdrawal of cash funds in UAH from current and deposit accounts of clients to 300 000 UAH per one day per client (with certain exceptions).

Non-Commercial FX TransactionsThe NBU established a monthly limit of the total amount of FX funds that may be transferred by an individual under any non-commercial transactions. Such limit (subject to certain exceptions) currently amounts to an equivalent of UAH 15,000 (if no supporting documentation provided and/or if no current account opened) and to UAH 150,000 (for payments out of a current account subject to provision of supporting documentation).

Certain Restrictions on Activities of Ukrainian BanksThe NBU introduced a number of restrictions on certain activities of Ukrainian banks such as restrictions relating to issuance and repayment of savings (deposit) certificates, limitations on daily volumes of foreign currencies that may be purchased by a Ukrainian bank on interbank market, prohibition on transactions with derivative instruments with foreign currency (or foreign exchange rate) as underlying asset, etc.