Along with other emerging markets,
Ukraine experiences significant pressure on its currency, the
hryvnia, although the loss of 10% of its value last week was also
influenced by the country's dire macroeconomic situation.
On 6 February 2014 the National Bank of Ukraine
(the “NBU”) issued Resolution No 49,
which imposes various capital restrictions with respect to the
purchase of foreign currency and non-cash payments by Ukrainian
banks on behalf of their customers (the "Rules").
According to the NBU, these temporary measures aim to ensure the
stability of the Ukrainian national currency, the hryvnia, to
protect depositors' interests, and generally to ensure the
sustainability of the banking system in Ukraine. We note that this
is not the first time that the NBU has introduced such measures.
Some of these restrictions were also applied by the NBU back in
2008 - 2009 in order to minimise the influence of the financial
crisis on the Ukrainian banking market.
The Rules are believed by the NBU to ensure
availability of foreign currency in the market and consequently
timely settlements under cross-border contracts. However, instead
the restrictions envisaged by the Rules may complicate day-to-day
operation for Ukrainian businesses and create additional expenses
due to prohibition to use daily proceeds for making necessary
payments. In particular this relates to Ukrainian importers using
short money for settlements with their foreign suppliers or having
such settlements on a daily basis. Due to restrictions on timing
for purchase of foreign currency, they may find themselves unable
to fulfil their payment obligations toward non-resident
counterparties on time, as well as bear additional expenses because
of inability to monitor and choose favourable exchange
Under the Rules:
1. It is prohibited to buy foreign currency for the
(i) early prepayment of loans (financial aid)
received from non-residents, including under any amendments to loan
agreements. It is not yet clear which amendments will be caught by
the Rules. However, it is likely that those amendments related to
overcoming the restrictions imposed by the Rules will be affected
(i.e. an earlier payment being amended to refer to as a scheduled
(ii) making investments abroad; and
(iii) covering part of insurance
reserves by insurers.
The Rules however, do not prohibit making these
payments and investments using owned (i.e.; not purchased)
2. All cash payment instructions, in any currency,
from a customer (either a legal entity or private entrepreneur),
shall be performed by the banks only on the basis of the balance of
a customer's account as of the beginning of a business day. Any
funds that will be credited to the customer's account during that
day will not be taken into account for these purposes. This
limitation does not extend to any mandatory payments, such as
payments to budgets, social funds, salaries and business
3. Banks are not allowed to buy foreign currency on the interbank
currency market on behalf of individuals (residents and
non-residents) for more than UAH 50,000 per month for the purposes
of transfers abroad. The limit does not apply to any payments or
- for study;
- for medical treatment abroad;
- for expenses in connection with a person's death
- under court judgements and decisions of courts,
investigation and other law enforcement authorities;
- in case of re-locating abroad for permanent
- in case of transfer abroad by non-residents of
their salary, pension, alimony received in Ukraine.
4. In order to buy foreign currency, legal entities
and private entrepreneurs are required to credit the relevant
amount in UAH to the bank's nominated internal (analytic) account.
The bank will then buy foreign currency in 6 business days after
this transfer by a customer. This means that customers will need to
plan their foreign currency payments and order foreign currency
well in advance.
The restrictions specified in items 2 and 4 above
seem to be aimed at supporting the banks' payment capacities, as
these provide some additional possibilities for banks to use
customers’ funds, although only for a short period of time.
This also enables the NBU to control the amounts of foreign
currency required in the market and to make necessary
The Regulation took effect as of 7 February 2014.
Although the Rules are temporary, the Regulation does not set out
any expiry date of its validity.