UNOFFICIAL TR UNOFFICIAL TRANSLATION ANSLATION AL TRANSLATION Officially published on March, 2015 On Resolving the Situation in the Monetary and Foreign Exchange Markets of Ukraine Bank of Ukraine Board Pursuant to Article 99 of the Constitution of Ukraine, Article 387 of the Economic Code of Ukraine, Articles 6, 7, 15, 25, 33, 44, 55, 56 and Sections IV, V and VIII of the Law of Ukraine On the National Bank of Ukraine, Articles 66, 67 and Chapter 11 of the Law of Ukraine On Banks and Banking, Articles 1 and 2 of the Law of Ukraine On FX Settlement Procedure, the Law of Ukraine On Charity and Charitable Organizations, Sections II and III of Decree of the Cabinet of Ministers of Ukraine No. 15-93 of February 19, 1993 On System of Foreign Exchange Regulation and Control, and in order to address the situation in the monetary market of Ukraine, in particular, in its FX segment, the Board of the National Bank of Ukraine has resolved: 1. To establish that settlements for merchandise exports and imports, mentioned in Articles 1 and 2 of the Law of Ukraine On FX Settlement Procedure, shall be made within 90 calendar days. 2. To require the mandatory sale in the interbank market of Ukraine of proceeds in foreign currency as received from abroad by legal entities other than authorized banks, as well as by physical persons trading as sole proprietors, foreign representative offices (other than official missions), into accounts opened with authorized banks for the conduct of joint business without the incorporation of a legal entity, as well as foreign currency received into non-residents accounts opened outside Ukraine based on individual licenses issued by the National Bank of Ukraine. Foreign currency receipts referred to in indent one of this paragraph shall be subject to the mandatory sale in the interbank foreign exchange market of Ukraine, including direct sale to the National Bank of Ukraine, at a rate of 75 per cent. The balance of the receipts shall remain in possession of the relevant residents or nonresidents to be used by them subject to applicable foreign exchange regulations. The following types of receipts shall be exempt from the mandatory sale in the interbank foreign exchange market of Ukraine: receipts by the State or those secured by sovereign guarantees;
2 proceeds from credits or loans attracted by Ukraine under international agreements as approved by the Parliament of Ukraine or from international financial institutions in which Ukraine holds membership or under agreements which Ukraine has committed to treating legally in the same way as loans originating from international financial institutions; receipts from projects (programmes) of technical assistance that have passed state registration; receipts into correspondent foreign currency accounts of non-resident banks with authorized banks; placement of deposits by non-resident banks on accounts with authorized banks; receipts by resident intermediaries acting under commission, consignment or agency agreements to be further transferred to the ultimate beneficiaries of such funds. Authorized banks serving such beneficiaries shall duly execute the mandatory sale of such foreign currency receipts as required by this paragraph; proceeds from foreign exchange transactions credited to accounts held by residents outside Ukraine based on individual licenses issued by the National Bank of Ukraine; funds received as charitable donations in the name of their beneficiary; remittances received by mistake. The mandatory sale requirement shall apply to receipts in any of the foreign currencies of the 1st Group of the Classification of Foreign Currencies and Investment Metals as approved by Management Board Resolution No. 34 of February 4, 1998 (in accordance with NBU Board Resolution No. 378 of October 24, 2002, as registered with the Ministry of Justice of Ukraine on October 24, 2002, No. 841/7129) (as amended) and in Russian rubles. An authorized bank shall initially credit foreign currency proceeds subject to mandatory sale under indent one of this paragraph to a separate sub-ledger account under the balance sheet account 2603 Distribution Accounts of Business Entities (hereinafter the Distribution Account). An authorized bank shall execute the mandatory sale of foreign currency receipts as required by this section: without a client order; necessarily on the next business day after the day of crediting the funds into a distribution account. 3. The National Bank of Ukraine shall monitor authorized banks with a view to ensuring that they verify the bona fide nature of payments under the client s transactions. For this purpose, the National Bank of Ukraine may require that banks discontinue transactions that pose a high risk of abuse and demand evidence proving the bona fide nature of client transactions. 4. In connection with the requirement of mandatory sale in the interbank foreign exchange market of Ukraine of foreign currency receipts from abroad, authorized banks may not relax foreign exchange controls in case of client export
3 transactions for which evidence is available that claims thereunder have been offset against similar counterclaims. Proceeds from exports received by bank clients in foreign currency shall be subject to sale as specified in paragraph 2 hereof. 5. After the close of business in the Interbank FX Deal Confirmation System of the National Bank of Ukraine each bank shall within the next two hours on the same day file a detailed application with the total volume of foreign currency up for mandatory sale on the following business day. A detailed application shall specify the totals of foreign currency receipts by currency code, type of receipt and include details of transactions exceeding the UAH equivalent of USD 50,000 at the official rate of exchange for the relevant currency as approved by the National Bank of Ukraine for the same business day. In a separate column of its detailed application, a bank shall specify the identification codes of legal entities/tax payer registration card numbers or passport details as registered on the Single Register of Legal Entities and Sole Proprietors, short names of legal entities or first, middle and last names of sole proprietors, currency codes, total volume of foreign currency subject to mandatory sale. 6. Introduce the following regulations for banks and financial institutions: 1) ban residents from repaying loans (including financial assistance) in foreign currency under contracts with non-residents, including supplementary credit/loan agreements, earlier than contractually arranged. The above requirement applies to the cases of early fulfillment of the obligations by the resident borrowers both against the credit/loan principal and any other payments stipulated by the credit/loan agreement. The National Bank of Ukraine will not register amendments to the agreements on granting foreign exchange credits to resident borrowers by non-residents, if the amendments concern acceleration of fulfillment of the obligations by the resident borrowers under these agreements or their early repayment. This subparagraph shall not apply to the early repayment of loans: raised by authorized banks provided that the proceeds from the early repayment are used to increase the bank s capital; with funds raised by a resident borrower under another loan agreement with a non-resident if such agreement provides for a later (full or partial) repayment than the previous loan agreement; 2) authorized banks shall buy and sell foreign currency in Ukraine s interbank foreign exchange market guided by the applicable regulation of the National Bank of Ukraine governing trade in foreign exchange. At the end of a business day, the total volume of purchased foreign currencies and investment metals for hryvnias may not exceed the volumes sold under the authorized banks transactions for their own benefit by more than:
4 0.1% of the bank s regulatory capital (in equivalent) under the tod transactions; 0.1% of the bank s regulatory capital (in equivalent) under the tom, spot, forward transactions; 0.1% of the bank s regulatory capital (in equivalent) under the tod, spot, forward transactions. The above requirement shall not apply to the foreign currency swap transactions. Authorized banks shall not perform for their own benefit transactions with fx or exchange rate derivatives in stock exchanges; 3) set a daily limit on the sale of foreign exchange or investment metals to one person within the same banking institution of the equivalent of UAH 3,000. Limits on the sale of foreign currency cash shall not apply to transactions between a bank and a resident individual provided that the following conditions are met simultaneously: the individual buys foreign exchange solely to meet his or her liabilities under a loan with an authorized bank; the bank sells foreign currency cash in the amount that does not exceed the individual s loan liabilities. The bank shall ensure that the individual strictly complies with the requirement to use the purchased cash foreign currency for its designated purpose; 4) on behalf of individuals, fx cash transfers can be made from Ukraine abroad as current non-trade transactions: without documentary evidence from the foreign exchange current account or without opening such an account - for the amount not exceeding an equivalent of UAH 15,000 within one banking (business) day. Non-resident individuals shall effect such transfers on the basis of the documents proving the funding sources; from the foreign exchange current account - for the amount exceeding an equivalent of UAH 15,000, but within UAH 150,000 per month. Resident individuals may effect such transfers only on the basis of the documentary evidence. The restrictions on the transfer amount mentioned in the third indent of this paragraph shall not apply to the following: payments for treatment at healthcare institutions abroad, as well as for transportation of patients; payments of expenses related to death of citizens abroad (transportation and burial costs); transfers claimed under verdicts, rulings, writs and orders of courts, investigative bodies and other law-enforcement authorities; payment of cost of education exceptionally to cover the educational process; transfer of funds received as labor remuneration by nonresidents in Ukraine, pensions and alimonies; payment of expenses to foreign court, investigatory, notary and other competent authorities (including taxes, charges and other levies);
transfers by citizens in case of leaving abroad for permanent residence; 5 5) banks shall be obliged to limit domestic currency cash disbursement through cashier s offices and ATMs to UAH 150,000 per day per customer. This subsection shall not extend to cash withdrawal in the following cases: payment of wages, business trip allowances (under standards set forth by law), pensions, scholarships and other social and similar payments (except financial aid); payment of guaranteed remuneration to depositors from funds of Households Deposit Guarantee Fund; 6) suspend issuance by bank of bearer savings certificates (CDs). Allow banks to issue personal savings certificates (CDs) denominated both in local and foreign currencies with maturities of at least six months. The repayment of saving (deposit) certificates of the previous issues shall be only possible through transfer of money to the account of certificate s owner or bearer. Redemption of personal CDs denominated both in local and foreign currencies with maturities of at least six months shall be made by banks with no restriction of amounts only after the maturity date as shown on the CD; 7) authorized banks shall be entitled to make early repayment of fx deposits received under all types of agreements except deposits received against personal CDs with maturities of at least six months in local currency at rate of fx purchase established by the authorized bank on the transaction date; 8) the banks shall be prohibited to extend loans in domestic currency to the customers (including under the opened credit lines and through rollover of previously extended loans), if the property rights for the fx held in the accounts with the banks are offered as a collateral for such loans. 9) establish for authorized banks the total fx position of a bank (L13 1) not exceeding 1%; 10) the authorized banks shall be obliged to restrict withdrawal (receipt) of fx cash or investment metals from client current and deposit accounts through cashier s offices and ATMs up to an equivalent of UAH 15,000 per day per customer, based on the National Bank of Ukraine official exchange rate. This requirement shall extend to withdrawal (receipt) of cash inside and outside Ukraine regardless of the number of accounts the same client may hold in one bank. This subparagraph shall not apply to: diplomatic missions and consular offices of foreign states in Ukraine, international financial institutions, representatives of international financial organizations and their employees if they are not citizens of Ukraine or do not
6 permanently live in the country and are accredited by the Ministry of Foreign Affairs of Ukraine; transactions to secure business trip allowances abroad to employees of resident legal entities, private entrepreneurs and foreign representative offices; 11) the authorized banks shall be obliged to include the book value of domestic government bonds indexed to the exchange rate less the accrued coupon payments in calculation of the total (long/short) open foreign exchange position; 12) the authorized banks shall ensure prudent policy in foreign exchange trading. To this end they shall implement: daily monitoring of client s fx purchase transactions in interbank fx market of Ukraine system-wide; analysis of clients fx purchase transactions at interbank fx market of Ukraine in regard to their relevance to the client s type of business and financial position, economic soundness and availability of an obvious legitimate purpose; enhanced fx control over clients fx purchase transactions that are made under contracts presented to a bank for the first time. Bank managers shall undertake personal control over performance by their banks of fx trade transactions at interbank fx market of Ukraine; 13) if instructed by the customers to purchase foreign exchange, the authorized banks shall be obliged to deposit at first funds in hryvnia to the specific analytical account of the balance sheet entry 2900 Accounts payable for foreign exchange, investment and precious metals purchase/sale for bank customers (hereinafter - Account 2900). Cash from this account may be transferred to purchase fx not before the fourth banking day after the date when UAH are credited to this account. An authorized bank shall transfer to account 2900 the amount in UAH sufficient to make a transaction of fx purchase in the amount as specified in the application; the amount shall be converted at the UAH/foreign currency exchange rate as of the date UAH funds are credited to account 2900 but not lower than the NBU rate established for that date. In case fx rate changes on the date of fx purchase transaction, authorized banks shall be allowed to additionally credit UAH funds to account 2900 in the amount necessary to satisfy the client s application for fx purchase. When client is not able to transfer the additional amount in UAH to purchase fx and agrees to purchase a smaller amount of foreign currency, the bank shall purchase fx in the amount smaller than that specified in the application for foreign exchange purchase. Authorized bank shall ensure strict observance of this subparagraph. Therefore, the banks shall deny their customers foreign exchange credit/advance payments if the funds are attracted for repayment of customer s foreign exchange liabilities in order to circumvent the requirements of this subparagraph. Requirements of this subparagraph shall not apply to purchases of foreign currency by individuals for the purpose of fulfilling their own obligations in foreign currency under the loan agreements signed with authorized banks;
7 14) an authorized bank shall have no right to purchase foreign currency at the instruction of a resident client (except for individuals) with fx holdings on current and deposit accounts with this bank and/or other authorized banks. Such a resident client shall fulfill its fx obligations using its available fx funds. The above ban on fx purchases shall not apply, if the total fx amount held in client s accounts with the authorized banks is less than USD 10,000 (in equivalent at the official rates of corresponding currencies on the day of the fx purchase application). For the purposes of applying this subparagraph, the following types of funds shall not be included into the total fx amount held on the client s accounts with authorized banks: funds on client s accounts, property rights for which are pledged as collateral under a collateral agreement; funds placed on deposit accounts before enactment of this Resolution; funds on account(s) with the bank declared insolvent, which is placed under a provisional administration or liquidation. To purchase foreign currency, a resident client (except for individuals) shall be obliged to provide the authorized bank with additional information about the total amount of fx funds held on the client s accounts with authorized banks (or lack of such funds) as of the application submission date [the information shall be verified by the client s signature (CEO or his Deputy for resident legal entities) and a seal (if available)]. On the application date fx funds held on the accounts, property rights for which are pledged as collateral, shall be additionally certified by the reference issued by the bank where the funds are placed. 15) in order to prevent bad practice of conducting fx transactions, the authorized banks shall build a registry of fx purchases and/or fx transfers abroad on client s instruction and submit it to the NBU on the day when the bank receives a client s application for fx purchase/payment instruction. If the amount stated in the fx purchase application/payment instruction for fx transferring abroad makes an equivalent of USD 50,000 or more as of the date of application/payment instruction, the authorized bank shall supplement the register with scanned copies of the documents justifying the transactions. Information about the fx purchase application/payment instruction for fx transferring abroad with amounts lower than the stated amount shall be recorded in registers in aggregate form. The package of documents to be submitted as justification of fx purchase/transfer abroad shall additionally comprise: for import operations - a reference from the State Fiscal Service of Ukraine certifying that the client has no outstanding debts on taxes, levies and payments; and cost examination act (approval) issued according to NBU Board Resolution On Transferring Domestic and Foreign Currencies to the benefit of Nonresidents under Specific Operations registered by Ukraine s Ministry of Justice on February 5, 2004 as No. 159/8758) (as amended);
8 for purchase and/or transferring abroad the fx funds received by the foreign investor for debt securities sold in the stock exchange (except for the government bonds of Ukraine) confirmation issued by the National Securities and Stock Market Commission that the operation has no attributes of a fictious operation; for purchase and/or transferring abroad the fx funds received by the foreign investor for the government bonds of Ukraine sold in the stock exchange - documentary evidence proving that the securities were purchased exclusively against proceeds from fx sale for hryvnia, and/or funds received by foreign investor from sale or redemption of Ukrainian government bonds or as a yield on Ukrainian government bonds (copies of relevant agreements, certificates/statements from authorized banks, depository institutions etc.). The requirement of this indent shall not apply to sale of government bonds of Ukraine purchased by the foreign investor before enactment of this Resolution. The authorized banks shall be prohibited to perform the client s transaction, if they receive notification from the National Bank of Ukraine that the transaction is not confirmed. The transactions confirmed may be performed not before the fourth banking day after the authorized bank s submission of information about these transactions to the register. In order to prevent nonproductive capital outflow abroad, the National Bank of Ukraine shall have the right to request and receive from the authorized bank the copies of additional documents to clarify circumstances of a specific transaction submitted to the respective register. In this case, the authorized bank may not perform the transaction until the receipt of confirmation from the National Bank of Ukraine. Information about money transfers of the fx purchased in compliance with this subparagraph need not to be included in the register to be submitted to the National Bank of Ukraine. This subparagraph shall not apply to purchase and/or transfer of fx under the client s order for the purpose of advanced fx payments for imported goods. The procedure for confirming the transaction eligibility is defined in NBU Board Resolution No. 124 of February 24], 2015 On Specific Features of Some Foreign Exchange Transactions; 16) cash withdrawal within Ukraine through electronic payment means issued by both residents and non-residents shall be executed exclusively in hryvnia; 17) purchase and transfer of foreign exchange for the following transactions shall be prohibited: transferring abroad funds received by foreign investors for the sale of securities issued by Ukrainian entities (except for sale of debt securities at a stock exchange); repatriation abroad of funds received by foreign investors from transaction of sale of equity rights not arranged in the form of shares, decrease of the authorized capitals of legal entities, withdrawal of equity from business entities by foreign investors; repatriation of dividends abroad to a foreign investor;
9 on basis of NBU individual licenses, except if transactions are executed under individual licenses issued by NBU: to legal entities for placing fx on accounts outside Ukraine; for foreign exchange transfer abroad by resident guarantor (surety) within limits covered by the guarantee (surety) liabilities under a credit issued by an IFI or with participation of foreign export-and-import agency; for foreign exchange transfer abroad by resident entities as one-time or regular payment of admission or membership fees in foreign currency to ensure current operation of nonresident legal entities; 18) the authorized banks shall be prohibited to transfer funds in hryvnia from an investment account with the purpose of purchasing Ukrainian government bonds by foreign investor. The above restriction shall not apply to purchase of Ukrainian government bonds by foreign investors at stock exchanges, which is performed exclusively against proceeds from fx sale for hryvnia, and/or funds received by foreign investor from sale or redemption of Ukrainian government bonds, or as a yield on Ukrainian government bonds. 19) transfer abroad of beneficent aid by charity organizations and transfer abroad by the Ministry of Healthcare to pay for medical treatment of individuals shall be made on the basis of documentary evidences of the importance of having such treatment in a foreign medical facility and shall not require an expert pricing valuation certificate of SOE Analytical Center for Monitoring International Commodity Markets, NBU s approval, or NBU individual license; 20) the authorized banks shall be prohibited to sell investment metals for noncash hryvnia to legal entities/individual entrepreneurs, if the total weight per one calendar week per banking institution per client exceeds 3.216 gold troy ounce (an equivalent in other investment metals calculated at the cross rate according to official investment metals rates set by the National Bank of Ukraine). Requirements of this subparagraph shall not apply to interbank transactions and sale by authorized banks of investment metals to enable their clients to fulfill their obligations in investment metals under the loan agreements. 7. During the period this Resolution is in effect other regulatory documents shall be effective in the part that does contravene this Resolution. 8. The Open Market Operations Department (Oleh Churii) shall bring the resolution to the attention of the NBU Regional Offices and banks in Ukraine for its further use. Banks of Ukraine shall inform their clients about the Resolution and its content. 9. This Resolution shall take effect starting from March 04, 2015 and be effective till June 03, 2015 inclusive.
10 Governor Valeria Gontareva Ind. 40
Oleksandr Pysaruk Vladyslav Rashkovan Yakiv Smolii Roman Borysenko Bohdan Lukasevych Viktor Novikov Oleh Churii Alla Shulha Monetary Policy Methodology Department Legal Department Editor Nataliia Vahina 2015 2015 2015