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On February 24, 2015 the NBU has adopted Regulation No. 124, which significantly complicates the procedure of advance payment (prepayment) for certain types of import contracts as well as forbids banks to purchase currency using the funds in hryvnia received by the clients as a credit. It is expected that the abovementioned restrictions will prevent using of the import contracts on prepayment conditions to transfer the capital abroad and will promote strengthening of hryvnia exchange rate. Therefore, from this moment:

• banks are not allowed to purchase foreign currency on behalf of the clients using the funds in hryvnia received by the clients as a credit (this restriction shall not be applied to transactions with natural persons with the purpose of performing their obligation to the authorized bank-creditor under the consumer loan agreement in foreign currency);
• banks are not allowed to carry on prepayment in foreign currency for import transactions under the foreign economic contract which total value exceeds the threshold of USD 50,000 (or equivalent amount at the NBU rate at the date of concluding of the agreement), unless the NBU approves performance of such payments.

That is, such prepayment shall be agreed in advance. For this purpose the bank creates respective register and submits it to the NBU together with scan copies of all documents, which constitute a basis for such prepayment. At that, the bank is not allowed to submit on the same date for the NBU confirmation information concerning two or more transactions which are performed by resident with the same non-resident. It is expected that payments confirmed by the NBU will be processed only on the fourth working day after the bank provides information concerning such payments into the register.

In the meantime, it is left undefined what one shall do in case the NBU does not approve such payment, and what are the reasons for such “disconfirmation”.

It is worth mentioning that the abovementioned restriction shall not be applied to the letter of credit payment method in case if the following requirements are satisfied: (1) letter of credit is confirmed by the bank whose rating meets the requirements of prime banks (not less than investing class) according to the classification of one of the leading international rating companies (FitchIBCA, Standard & Poor’s, Moody’s); (2) foreign currency purchase is performed exclusively in order to guarantee the acceptance of the letter of credit and for the  services of the banks-non-residents involved in transactions under such letter of credit; (3) payment is performed after documents have been received and properly submitted.

• The banks shall apply the letter of credit payment method which meets three abovementioned requirements in case of conducting of advance payments in foreign currency for the import transactions under the foreign economic contract which total value exceeds the threshold of USD 50,000 (or equivalent amount at the NBU rate at the date of concluding of the agreement).

This regulation points out that restriction related to the prepayments shall be also applied in case if import transactions are performed under different foreign economic contracts concluded with the same non-resident and total amount of payments under such contracts exceeds the thresholds of $50,000 or $500,000 within one calendar month.

The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice. 

Kind regards,

© WTS Consulting LLC, 2015

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