In a move to mitigate the adverse effect of the COVID-19 outbreak on the Ukrainian economy, Ukraine adopts measures to support local businesses and households.
Statutory prohibition of interest rate increase
On 30 March 2020, the Verkhovna Rada of Ukraine passed Law No. 3275, which, among other things, established a temporary prohibition for Ukrainian lenders to increase interest rates under loan agreements with Ukrainian borrowers. The prohibition will remain in effect for the duration of the restrictive measures introduced by the Government of Ukraine in response to the COVID-19 pandemic.
The law will come into force upon signing by the President of Ukraine and its official publication, which is expected to occur in the week commencing 30 March 2020.
On 26 March 2020, the National Bank of Ukraine (NBU), adopted Regulation No. 39, which temporarily exempts Ukrainian banks from certain credit risk requirements when assessing borrowers' credit risks.
The regulation also provides that Ukrainian borrowers affected by the COVID-19 quarantine may enjoy certain regulatory relaxations when restructuring their financial obligations with Ukrainian banks, provided that the borrowers were not in default under such obligations as of 1 March 2020.
Regulatory relaxations for Ukrainian banks:
Earlier in March 2020, the NBU introduced certain measures to maintain the stability of Ukraine's banking and financial sectors. Such measures include, among other things:
- long-term refinancing loans for Ukrainian banks to support bank lending and liquidity
- postponement of banks' stress tests and buffer capital requirements
- suspension of on-site audits of banks and financial institutions
Foreign exchange restrictions:
As of 30 March 2020, no foreign exchange restrictions have been introduced by the NBU specifically in response to the COVID-19 outbreak and the related economic downturn in Ukraine.
(To learn more about the previously introduced foreign exchange restrictions, which currently remain in effect, please refer to our publication "Ukraine's FX Market: Review of 2019 and Outlook for 2020")
In particular, there are no restrictions on the amount of dividend repatriation and repatriation of other investment proceeds (e.g., received from the sale of corporate rights or securities).
Should the situation in Ukraine's financial sector become unstable, the NBU would have the authority under Ukrainian legislation to intro duce certain measures and restrictions to stabilize the market, including:
- mandatory sale of foreign currency proceeds received from abroad
- special rules for carrying out capital flow transactions
- introduction of permits or limits for certain foreign currency transactions