The National Bank of Ukraine (the NBU) continues to ease capital control restrictions applicable to cross-border transactions.
On 22 November 2016, the NBU introduced a number of changes to certain currency control, investment and cross-border loan regulations, the most notable of which are set out below.(1) Currency Control Restrictions
The NBU amended the temporary currency control restrictions effective until 15 December 2016, thereby permitting Ukrainian banks to conduct proprietary trading in foreign currency derivatives on stock exchanges. This liberalization measure aims to provide local banks with an important hedging instrument, which in turn should lower the existing pressure on the interbank currency market.
Furthermore, the NBU expanded the list of cases in which Ukrainian banks are permitted to purchase foreign currency for resident clients holding more than USD 25,000 (or its equivalent) in foreign currency accounts. Now any foreign currency available to a client which is:
- utilized by that client to make other payments on the same day as the additional foreign currency needs to be purchased; or
- summed up with the additional foreign currency to be purchased by the client for the making of the relevant payment,
will not be taken into account for the calculation of the USD 25,000 limit.
In addition, the NBU has permitted Ukrainian banks which are members of international payment systems to place guarantee deposits in an amount exceeding USD 50,000 (or its equivalent) in accounts of such payment systems abroad, provided that such banks hold the relevant individual payment licenses from the NBU.(2) Investment Regulations
Starting from 23 November 2016, the NBU has permitted Ukrainian banks to invest in highly liquid debt securities of foreign issuers without obtaining an individual investment license from the NBU. In order to qualify for the above exception, the targetted debt securities must satisfy certain criteria outlined by the NBU. In particular, such debt securities must:
- be issued by an international financial institution or such country as the US, Japan, Germany, the UK, France, Italy or Canada;
- be denominated in USD, JPY, EUR, GBP or CAD; and
- mature within up to five years from their purchase.
The NBU also changed certain rules for investing in Ukraine. With effect from 23 November 2016, the NBU has allowed crediting to an investment account of a foreign investor deposits assigned to it by another foreign investor. These changes are designated to adjust the relevant investment regulations to the current market conditions.(3) Cross-Border Loans
Effective from 30 November 2016, the NBU is to exclude from the calculation of the maximum cost of a cross-border loan attracted by a local borrower the upfront fee and other costs payable to an export credit agency which has guaranteed such cross-border loan. In order for this exemption to apply, the relevant export credit agency must be listed as such on the official website of the OECD.
The NBU has also adjusted the regulation of cross-border lending by Ukrainian residents. In order to extend a loan to a foreign entity, a resident lender would need to prove the legality of its credit resources and substantiate the commercial purpose of extending such financing to the foreign borrower.