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Business asks to be allowed to fulfill their financial obligations to international creditors

14/ 04/ 2023
  At the beginning of the war, the NBU adopted Resolution No. 18 on the operation of the banking system during martial law. The document imposes significant restrictions on the banking system of Ukraine. In accordance with paragraph 14 of this Resolution, authorized institutions are prohibited from performing cross-border currency transfers from Ukraine to correspondent accounts of non-resident banks in hryvnia/foreign currency. Thus, when the full-scale war broke out, thanks to all the decisions taken, the banking system survived and continues to operate. However, the current inability of Ukrainian companies to transfer funds to foreign creditors could potentially lead to default. That would have a very negative impact on both the financial position of companies and the reputation of Ukrainian issuers. The occurrence of a payment default by the companies may lead to demands from investors for early repayment of the entire amount of debt and the initiation of litigation against the companies with the possibility of blocking assets and operations. The Government and the Ministry of Finance plan to continue paying their obligations and want to maintain constructive relations with creditors so that after the war they can raise funds to rebuild Ukraine. It is equally crucial for Ukrainian businesses to maintain their reputation as reliable partners to international financial institutions. Business is ready to fulfil its obligations. Moreover, it is likely to take out additional loans during the reconstruction of Ukraine, and in such circumstances, it is extremely important to maintain its reputation in order to raise funds on the most favourable terms. It is also worth adding that if companies are unable to fulfil their obligations to pay coupons on Eurobonds and loans, even if the Government and the Ministry of Finance fulfil their obligations to creditors, this will still have a negative impact on the reputation of Ukraine and its businesses. Therefore, the European Business Association appeals to the Prime Minister of Ukraine Denys Shmyhal, NBU Governor Andriy Pyshnyi, and First Vice Prime Minister of Ukraine Yulia Svyrydenko to ease restrictions on the payment of interest payments. As a proposal, it is necessary to establish that the total amount of funds allowed to be transferred under the subparagraph of the Resolution within one loan agreement in one calendar month may not exceed USD 3,000,000, or the amount equivalent to USD 3,000,000, or 1/5 of the part to be paid under the loan agreement. It is also worth noting that the restrictions imposed by Resolution No. 18 have significantly complicated the operation of international payment systems in Ukraine. Therefore, the EBA community also requests the easement for businesses and payment operators of restrictions on cross-border transfers of currency values from Ukraine/transfers of funds to correspondent accounts of non-resident banks in hryvnia/foreign currency opened with resident banks, including transfers made on behalf of clients. The EBA is ready to engage in cooperation to make the necessary changes as efficiently as possible for the sustainable operation of business and the economy of Ukraine as a whole.

At the beginning of the war, the NBU adopted Resolution No. 18 on the operation of the banking system during martial law. The document imposes significant restrictions on the banking system of Ukraine.

In accordance with paragraph 14 of this Resolution, authorized institutions are prohibited from performing cross-border currency transfers from Ukraine to correspondent accounts of non-resident banks in hryvnia/foreign currency.

Thus, when the full-scale war broke out, thanks to all the decisions taken, the banking system survived and continues to operate. However, the current inability of Ukrainian companies to transfer funds to foreign creditors could potentially lead to default. That would have a very negative impact on both the financial position of companies and the reputation of Ukrainian issuers. The occurrence of a payment default by the companies may lead to demands from investors for early repayment of the entire amount of debt and the initiation of litigation against the companies with the possibility of blocking assets and operations.

The Government and the Ministry of Finance plan to continue paying their obligations and want to maintain constructive relations with creditors so that after the war they can raise funds to rebuild Ukraine.

It is equally crucial for Ukrainian businesses to maintain their reputation as reliable partners to international financial institutions. Business is ready to fulfil its obligations. Moreover, it is likely to take out additional loans during the reconstruction of Ukraine, and in such circumstances, it is extremely important to maintain its reputation in order to raise funds on the most favourable terms.

It is also worth adding that if companies are unable to fulfil their obligations to pay coupons on Eurobonds and loans, even if the Government and the Ministry of Finance fulfil their obligations to creditors, this will still have a negative impact on the reputation of Ukraine and its businesses.

Therefore, the European Business Association appeals to the Prime Minister of Ukraine Denys Shmyhal, NBU Governor Andriy Pyshnyi, and First Vice Prime Minister of Ukraine Yulia Svyrydenko to ease restrictions on the payment of interest payments. As a proposal, it is necessary to establish that the total amount of funds allowed to be transferred under the subparagraph of the Resolution within one loan agreement in one calendar month may not exceed USD 3,000,000, or the amount equivalent to USD 3,000,000, or 1/5 of the part to be paid under the loan agreement.

It is also worth noting that the restrictions imposed by Resolution No. 18 have significantly complicated the operation of international payment systems in Ukraine. Therefore, the EBA community also requests the easement for businesses and payment operators of restrictions on cross-border transfers of currency values from Ukraine/transfers of funds to correspondent accounts of non-resident banks in hryvnia/foreign currency opened with resident banks, including transfers made on behalf of clients.

The EBA is ready to engage in cooperation to make the necessary changes as efficiently as possible for the sustainable operation of business and the economy of Ukraine as a whole.

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