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Friday, 01 September 2017 09:45

August Heat Brings New FX Rules to Ukraine



Notwithstanding the scorching heat at the beginning of August in Kyiv and the extended vacation of its Governor, the National Bank of Ukraine (the "NBU") continues to relax the foreign exchange and currency control restrictions introduced to stabilise the Ukrainian financial market.

In particular, the NBU has lifted a number of restrictions on carrying out domestic and cross-border transactions.  The most significant of those are described below.

(1) Foreign cash can be used as collateral for UAH loans

The NBU has permitted Ukrainian banks to extend hryvnia loans that are secured by a cash collateral in a foreign currency.

Up until now, Ukrainian banks were expressly prohibited from extending loans secured with a foreign currency collateral.

The regulator expects that this step will promote more active lending by Ukrainian banks.

These changes became effective on 30 August 2017.

(2) Prepayment of cross-border loans

The NBU has also expanded the list of exceptions for early repayment of cross-border loans by explicitly allowing:

  • a Ukrainian borrowing bank to early repay its cross-border loans;
  • any Ukrainian borrower to early repay its cross-border loans in favour of a foreign bank;
  • any Ukrainian borrower to early repay its cross-border loans, provided that an international financial institution owns a participatory interest in, or is a shareholder of, such borrower and/or its foreign lender; and
  • any Ukrainian borrower to early repay its cross-border loans in favour of a foreign lender, provided that a foreign state with a sovereign credit rating not lower than "A" owns a participatory interest in, or is a shareholder of, such foreign lender.

These changes took effect in July-August 2017.

(3) Cash withdrawals

With effect from 24 August 2017, clients of Ukrainian banks are now permitted to withdraw cash in foreign currency from their bank accounts without any limitations on the amount of such withdrawals.

Before these changes were introduced, bank clients could not withdraw more than the equivalent of UAH 250,000 (approximately USD 9,750) in foreign currency from their bank accounts per one calendar day.

New framework law on FX regulation in Ukraine

In addition, early in August 2017, the NBU presented a new draft law "On Currency" aimed at introducing free movement of capital in Ukraine based on the relevant EU directives.

The draft law is currently being discussed publicly among all stakeholders and is expected to be submitted to the Parliament by the end of this year.


Additional notes

This LEGAL ALERT is issued to inform Baker McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.

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