Changes to the Foreign Exchange Regulatory System – Lexology
Responding to the current situation of the national economy and balance of payments, the National Bank of Ukraine is rapidly adjusting the pre-existing operating rules of the banking system during the period of martial law. Throughout April and early May 2022, there was a trend of implementing new restrictions and adjusting existing restrictions to “prevent unreasonable capital outflows” under martial law.
Thus, on May 10, 2022, Resolution No. 96 of the Board of Directors of the National Bank of Ukraine dated May 9, 2022 entered into force to amend Resolution No. 18 of the Board of Directors of the National Bank of Ukraine on the functioning of the banking system under martial authority. Law of February 24, 2022.
The novelties mainly concern the operations of foreign investors who are now allowed to transfer funds abroad, which will be received after April 1, 2023, in the context of either redemption or payment of the yield of Ukrainian sovereign bonds subject to the terms of their placement.
On the other hand, restrictions have been imposed on the activities of Ukrainian investors abroad, as a temporary ban has been imposed on foreign establishments for the purpose of purchasing securities, stocks and bonds, and the payment of brokerage fees for such transactions with the use of payment cards issued by Ukrainian banks. The above restrictions do not apply to the use of payment cards abroad and in Ukraine for payment of any other goods, work or services. Such settlements can still be made without any restrictions.
In addition, individuals are allowed to sell bullion whether or not it is physically delivered to banks.
Interbank currency market
The NBU has suspended daily non-cash transactions involving the buying and selling of currencies in euros (which had been permitted since the beginning of March 2022), but will only conduct such transactions in US dollars.
In addition, the resolution reduced the number of banks eligible to participate in such transactions. In accordance with the novelties, a bank will be allowed to transact with the NBU if it has complied with the limit set for the total open position during the ten calendar days preceding the date on which it applies to the NBU.
Adjustments have been made to likely address some shortcomings identified in previous restrictions. In particular, the Resolution:
- expressly provides for the right to make transfers abroad for the purpose of paying child support and allows non-residents to remit child support amounts received in connection with the death of a military member
- adjusts certain issues relating to the fulfillment of settlements in the context of foreign trade operations
- technically changes NBU procedures for issuing individual permits for money transfer abroad
- lifts the ban on certain debit operations on the accounts of Russian and Belarusian residents and persons who are their beneficial owners, and provides for the possibility of debiting such accounts under special permissions of the NBU