The National Bank of Ukraine Presses ahead with Relaxing Administrative Restrictions in the FX market
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The National Bank of Ukraine presses ahead with easing monetary policy by liberalizing FX controls. The relaxation of restrictions has been possible in the context of a favorable situation in the FX market and given that the distribution of risks to the inflation projections is balanced. As before, the NBU, in line with the New currency regulation concept focuses its efforts on removing obstacles to foreign economic transactions and inflows of foreign direct investment. ● First, the NBU has repealed a provision shortening the deadline for settlements under export/import transactions to 120 days. From now on, the maximum settlement period under export and import transactions shall be 180 days, as provided for by the applicable law. ● Second, investors will be allowed to repatriate funds invested in Ukraine. Until now, a ban has been put in place on FX purchases and transfers abroad due to foreign investors after the sale of corporate rights, reduction of the statutory capital of legal entities or withdrawal from business partnerships of foreign investors. The NBU has authorized such transactions. To prevent the outflow of capital via the shadow schemes, such transactions will be subject to the regulator’s monitoring in terms of their compliance with a specified list of requirements. ● Third, businesses will be allowed to repay external loans before they fall due if settlements under such transactions (involving the use of guarantees, standby letters of credit and are effected through authorized banks and/or foreign banks) are guaranteed by international financial institutions. “All these steps are expected to improve the country’s investment climate and facilitate operations of companies engaged in foreign trade. At the same time, none of these steps will be contributing to the destabilization of the FX market,” said NBU Acting Governor Yakiv Smolii at the press briefing on monetary policy. Apart from the relaxation of the aforementioned anti-recessionary restrictions, the NBU removes restrictions barring authorized banks from opening correspondent accounts in foreign currencies of the 1st Group of the Classification of Foreign Currencies and Investment Metals with non-resident banks of the countries whose currency is assigned by the NBU to the 2nd or 3rd Group of the Classification of Foreign Currencies. This move will make it easier for Ukrainian banks to open new correspondent accounts with foreign banks. At the same time, as part of measures to prevent unproductive capital outflow from Ukraine, the NBU imposes a requirement to disclose ultimate beneficial owners (UBOs) of non-resident creditors. These requirements shall apply to cases where the registration of the loan agreement entered into with resident borrowers other than banks is required. The NBU has streamlined controls over compliance with the limits set on the maximum interest rates on external loans in cases when fees and charges are paid prior to the loan disbursement and/or during the first year of the validity period of the agreement. The procedure stipulates that monitoring is carried out at the end of the first year of the validity period of the Agreement rather than on the transaction date. This approach will allow resident borrowers to diversify the terms of loan agreements. The amendments to this effect are approved by NBU Board Resolution No. 41 of 25 May 2017 On Amendments to Some NBU Regulations. the maximum settlement period under export and import transactions to 180 days shall come into effect from 26 May 2017. Other amendments approved by NBU Board Resolution No. 41 shall take effect from 12 June 2017. |
