At the end of June, the Ukrainian parliament passed the Law “On Currency and Currency Transactions”. The Law is a framework one since most changes for banks and business are expected only after the adoption of regulatory acts of the NBU.
Novelties under this Law will allow Ukraine to move to freedom of conducting foreign exchange operations according to European standards, and the withdrawal of individual licenses for investing abroad also expands the opportunities for residents to carry on foreign economic activity.
Katerina Breduliak, Senior Associate, banking and finance practice, comments on the Law, amendments and restrictions exclusively for The Ukrainian Journal of Business Law:
On 21 June the Ukrainian Parliament passed the Law On Currency. How will liberalization of foreign exchange regulation and control affect business operations? To what extent will this simplify debt financing?
The long-awaited Law On Currency and Currency Transactions (hereinafter — the Law) is quite liberal in relation to business. The extension of business deadlines for export and import transactions payments for more than 180 days will improve the competitive position of Ukrainian exporters and importers and, absolutely increase the space of consensus with regard to terms of payments among trading partners. The Law cancels sanctions in the form of penalty and termination of foreign economic activity in case of violation of the closing terms of contracts (currently a penalty of 100% of the transaction amount). Such innovation as the withdrawal of individual licenses for investing abroad also expands the opportunities for residents to carry on foreign economic activity.
The Law allows Ukraine to move to freedom of conducting foreign exchange operations according to European standards. Such changes have a positive impact on the cooperation of Ukrainian residents with European financial intermediaries, and the terms of cooperation will be similar to those of European ones.
It is anticipated that a company should attract loans from abroad without registering this with the National Bank of Ukraine.
The company must only notify the regulator of the fact of receipt of the loan, and such information will be used only for statistics. Thus, Ukrainian companies and banks should attract customers not only within the country, but also in European countries.
However, liberalization does not mean the absence of control. With the adoption of the Law, the NBU and banks will have the right to require documents on operations conducted by companies and individuals. And the NBU and State Fiscal Service should conduct audits on currency legislation issues.
Despite such revolutionary changes, the financial stability of the Ukrainian currency market depends on the NBU’s restrictions and requirements, and even with the adoption of the Law, the regulator has retained the right to dictate the rules of the game at any time.