The National Bank of Ukraine Extends FX Restrictions

On 14 September 2016, the National Bank of Ukraine (the "NBU") issued Resolution No. 386 "On Regulating the Situation in the Monetary and Foreign Currency Markets of Ukraine" ("Resolution 386") effective from 15th September until 15 December 2016 inclusive.

The following key FX restrictions are applied:

• a maximum 120-day term for the return of foreign currency proceeds under export contracts after the supply of goods/services outside Ukraine and the same maximum 120-day term for the supply of goods/services after making advance payment abroad by residents under import contracts;
• a mandatory sale of 65% of the proceeds in foreign currency transferred by non-residents to Ukrainian bank accounts (with certain exceptions including, but not being limited to, loans from international finance institutions where Ukraine is a member; loans involving foreign export credit agencies; funds transferred by a non-resident as a security for participation in a state procurement or privatization of a state property; foreign investments etc.);
• a prohibition of early repayment of loans in a foreign currency (with certain exceptions);
• a prohibition on the purchase and transfer abroad of foreign currency in order to (i) pay dividends to non-residents (with the exception of the payment of dividends distributed for 2014-2015, subject to certain limitations); (ii) pay the purchase price to a non-resident following the sale by the non-resident of shares or a participatory interest in a Ukrainian company to a Ukrainian resident; (iii) pay to a non-resident following the decrease of a Ukrainian company’s charter capital or a withdrawal by a non-resident from a Ukrainian company; (iv) pay the purchase price to a non-resident for the securities issued by Ukrainian companies (except for the sale of debt securities by a non-resident at a stock exchange and the sale of state bonds at and outside the stock exchange);
• a prohibition of payments abroad under the individual licences previously issued by the NBU (with certain exceptions including, but not being limited to the placement of funds by legal entities on a bank account abroad; the payment by a Ukrainian guarantor (surety) to a lender which is an international finance institution or foreign export credit agency; the payment by Ukrainian legal entities of membership fees for a non-resident legal entity);
• a requirement for Ukrainian banks to continue exercising control over export operations in case of set-off by the parties (with certain exceptions);
• a prohibition on the banks to buy foreign currency for its clients (except for individuals) if the clients have their own funds in foreign currency on their accounts (with certain exceptions);

Resolution 386 has increased the limits for the withdrawal of cash in a foreign currency from bank accounts up to the equivalent of UAH 250,000 per day and allowed foreign currency to be bought for the purposes of making payments under a cross-border loan agreement, even if the total amount of the foreign currency on the client's accounts exceeds the equivalent of USD 25,000.

Legislation:
Regulation of the National Bank of Ukraine No. 386 "On Regulating the Situation in the Monetary and Foreign Currency Markets of Ukraine" dated 14 September 2016.