National Bank of Ukraine continues to ease foreign exchange restrictions

National Bank of Ukraine continues to ease foreign exchange restrictions 150 150 Esquires

New currency easing is aimed at facilitating business and improving the investment attractiveness of the country. However, the termination of currency supervision of “minor transactions” (up to UAH 150 000) or the replacement of licenses with limits, is only one of the steps towards establishing a free capital flow regime.

Read more in the article by attorney Vita Shkaraputа, senior associate at ESQUIRES.

The publication is available in Ukrainian.

The National Bank of Ukraine (hereinafter – the “NBU”) continues to weaken currency restrictions. On February 7, 2019, the Law of Ukraine “On Currency and Currency Transactions” and 10 regulatory legal acts that replaced the previous 56 acts entered into force and became the basis for a new liberal system of currency regulation. The new legislation provides for about 20 easings in the foreign exchange market. What has changed in the relations of residents and non-residents in obtaining loans?

Before the entry into force of the new currency legislation, the procedure of obtaining of loans by residents and non-residents (loans, repeated financial assistance) in foreign currency was regulated by Provision No. 270 [1]. The same Provision determined the obligation of the NBU to establish maximum interest rates for such agreements.

An agreement under which a resident received a loan from a non-resident was subject to mandatory registration in the NBU, and in cases where the agreement provided for a loan with funds received to the account of the resident borrower outside of Ukraine and / or repayment of the debt on such a loan was carried out from the resident’s account, opened abroad, the resident borrower had to receive an individual license to place currency values ​​on accounts outside of Ukraine. Now the obligation to register external borrowings and obtain individual licenses has been canceled.

Credit agreements with non-residents: current procedure

From February 7, 2019, banks are obliged to provide the NBU with information on contracts in the NBU Automated System “Credit Agreements with Non-Residents” (hereinafter referred to as the “Automated System”) in electronic form, which is essentially a notification registration. As for contracts that were registered before February 7, 2019, such registration is no longer valid. At the same time, all information about such agreements is systematized in an automated mode and transferred to the accounts of the Automated System.

Notification registration works as follows. The resident (borrower, new debtor),that is not a bank, apply to the chosen bank regarding his intentions to use the account for cash settlements (payments) under the loan agreement and provides all documents / information about the agreement (taking into account all the necessary details for performing operations under the agreement) . Such information must be provided prior to the actual conduct of the currency transaction.

In turn, the bank within 5 (five) business days from the date of submission of such information (but no later than on the day of the first currency transaction) informs the NBU about the relevant agreement. Such information is added by the NBU to the Automated System without obligations of any nature. The Bank has access to the Automated System, which allows the Bank to track the status of registration of the NBU agreement, and informs the resident borrower of the relevant information in the Automated System.

The list of information provided by the resident borrower and, accordingly, the bank to the NBU, has to contain the information about: the agreement, additional agreements or other documents relating to the implementation of the agreement and foreign exchange transactions (for example, payment schedule), additional information (if available, including information on replacing a debtor and transferring a debt, on changing a bank, on a new loan agreement – an innovation), the amount of a credit / loan (repeated financial assistance) – amount, currency; deadline for settlements under the contract, etc.


Foreign exchange transactions for the purchase of foreign currency and / or transfer in connection with the payment by a resident of his debt obligations are carried out by a bank servicing transactions under this loan agreement.

If the non-resident creditor is a bank, such operations are carried out through the bank, that services the loan agreement (the bank is the initial creditor, the bank that is identified as the main  in bank consortium, or each of the participating banks within the framework of the funds provided; the bank that is a new creditor or a bank servicing transactions under the relevant loan agreement, in case of replacement of the lender under the loan agreement) or via any other bank, chosen by the resident borrower in accordance with the procedure established by law.

Residents, in order to fulfill their debt obligations to a non-resident (creditor or guarantor /   pledger that fulfilled obligations to a non-resident creditor foe the resident borrower), conduct foreign exchange transactions to purchase foreign currency and / or transfer from their own accounts a foreign currency / hryvnia abroad or to a non-resident’s current account in Ukraine (in foreign currency and hryvnia, except for the investment account).

Non-residents are prohibited from using investment accounts to conduct transactions to provide loans to residents or to receive funds from residents in connection with the payment of debt obligations. This rule is also applied to the refund of payment of the loan received by the resident-borrower, as well as interest for its use, and making payments in a currency other than the currency in which the amount of the loan / credit is determined under the agreement. Transactions can be conducted (if necessary) through other current accounts of a foreign investor in Ukraine or his accounts opened abroad.


Residents must purchase foreign currency / transfer funds in foreign currency / hryvnia in compliance with the limits defined by the Provision on protective measures and determine the procedure for certain transactions in foreign currency, approved by the Rulling of the NBU Board dated on 02.01.2019, No. 5. As a general rule a resident legal entity / individual entrepreneur is allowed to carry out such currency operations during a calendar year for a total amount not exceeding EUR 2,000,000 (or the equivalent in another foreign country current currency or hryvnia).

This restriction does not apply to obligations to pay debt obligations to non-residents, namely:

  • payments in the form of interest on loans (loans) – current foreign exchange transactions;
  • transactions related to the fulfillment of obligations under guarantees, pledges, as well as operations to repayment by resident-debtor of funds to a non-resident guarantor, who performed a guarantee / pledge obligation of the resident debtor to the creditor (resident or non-resident). Such an exception can be applied in case the transactions related to the fulfillment of the main obligation under the relevant contract, secured by guarantee, pledge, are not subject to a limit (for the total amount that can not exceed EUR 2,000,000 / equivalent in another currency during the calendar of the year);
  • transactions to fulfill debt obligations to non-residents, on loans attracted by residents, loans (repeated financial assistance), including transactions carried out through accounts of residents-borrowers, that are opened abroad – transactions related to the movement of capital.

The accrual of foreign currency

A resident buys foreign currency in order to pay his own debt obligations to a non-resident under a contract, has the right to accumulate acquired foreign currency by the next payment dates established by this contract (on a current account in the bank that services such transactions), without limiting the terms of its use for the during the validity of the specified contract.

One of the conditions for such “accumulation” is the intended use of such funds, or in other words, solely for the purpose of payment one’s own debt obligations under such an agreement and in accordance with the procedure established by such an agreement.

A resident is obliged to transfer foreign currency bought, exchanged in the Ukrainian currency market to fulfill his own obligations to non-residents only from a resident’s current account opened in a bank, except for settlements under the letters of credit.

Mandatory sale of foreign currency

As a rule, the receipts of foreign currency from abroad in favor of legal entities – residents and in the territory of Ukraine from current accounts of legal entities – non-residents (except for investment accounts) in favor of legal entities – residents are subject to mandatory sale on the foreign exchange market of Ukraine. This requirement applies to receipts in foreign currency of the 1st group of the Classifier of foreign currencies and bank metals, approved by the Resolution of the National Bank of Ukraine Board of Directors dated on 04.02.1998 No. 34 (hereinafter referred to as the “Classifier”) (including the euro, dollar, pound sterling) and in Russian rubles. From March 1, the percentage of income to be sold on the currency market of Ukraine to banks and / or NBU was reduced to 30 percent (from February 7, 2019 to February 28, 2019, the share of sales was 50 percent). The remaining income in foreign currency remains at the disposal of residents and non-residents and is used by them in accordance to the provisions of the currency legislation.

However, income in foreign currency is not subject to such mandatory sale:

  • on a сredit/ loan attracted by a resident-borrower from a non-resident under the relevant agreement, provided that this resident uses such receipts for the “intended purpose” (solely to pay their own debt obligations in foreign currency to creditors (non-residents, banks) with mandatory compliance with the laws of Ukraine regulating the implementation of such currency transactions); and
  • on a credit / loan in case that the implementation of such a credit / loan (in full or in part) is accompanied by a foreign person participation (through lending, insurance, guarantee), whose participants (shareholders) include a foreign country with an official rating at least equal to A category, confirmed in the newsletter of one of the world’s leading rating companies (Fitch Ratings, Standard & Poor’s, Moody’s).


In general, an increase in the responsibility of banks in terms of expanding their functions to supervise the compliance of legislation by subjects of currency and, as a result, a simplified procedure for registering credit agreements, a gradual decrease in the requirements for the mandatory sale of foreign currency earnings, the possibility of residents to accumulate currency for settlements on their debt obligations to non-residents, had extraordinary progressive intentions.

However, the new currency regulation leaves the NBU with all levers of influence in the form of the possibility of introducing preventive measures of protection in the presence of signs of an unstable financial condition of the banking system, among which the establishment of the peculiarities of transactions related to capital flows (including those related to the granting and procurement of loan by residents), the introduction of permits or limits for certain currency transactions, etc.

Summing up, it should be noted that, indeed, new currency easing is aimed at facilitating business and improving the investment attractiveness of the country. However, the termination of currency supervision of “minor transactions” (up to UAH 150 000), or the replacement of licenses with limits, is only one of the steps towards establishing a free capital flow regime.

The article is available in pdf format:Shkaraputa_Article_Loans_new_currency_regulation_U09

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