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NBU Eases Some FX Restrictions and Changes Terms for Providing Refinancing Loans to Banks As Banking System Liquidity Reaches Record Highs

NBU Eases Some FX Restrictions and Changes Terms for Providing Refinancing Loans to Banks As Banking System Liquidity Reaches Record Highs

The National Bank of Ukraine continues to analyze the situation in the FX and financial markets and fine-tune the regulation instruments, taking into account requests from the public, businesses, volunteers, and the state authorities, while also considering the record-high banking system liquidity. Changes have been introduced from 5 November 2022 regarding the following:

the purchase of goods abroad to support Ukraine’s defense capability

The NBU expanded the list of defense goods, which volunteers are allowed to buy abroad, with thermal imaging cameras and other devices intended to enhance Ukraine’s defense capability.

Previously, the list was widened to also include handheld transceivers, bulletproof vests, helmets, military and tactical uniform, military and tactical footwear, protective clothing, optical tracking devices, unmanned aerial vehicles, sleeping bags, ground pads, and military medical kits.

As previously reported, effective 6 August 2022, individual volunteers can pay with hryvnia payment cards for the goods purchased abroad that are on the list defined by the NBU, while individuals who are actually engaged in volunteering can buy and transfer, from 4 April 2022, foreign currency abroad to buy the relevant goods intended to enhance Ukraine’s defense capability (within a monthly limit of the equivalent of UAH 400,000).

activities of Ukrainian exporters

The NBU created conditions for the Ukrainian exporters to be able to participate in tenders for the supply of goods to nonresidents. Starting on 5 November, banks received an opportunity to provide tender guarantees on such transactions.

These changes will improve the business environment for Ukrainian manufacturers as the tender guarantees are applied to enter new markets and explore new export opportunities

the use of foreign currency by charitable funds

Banks will not take into account balances in the foreign currency on accounts of charitable funds and will not require to sell and/or use the available FX funds when accepting bids to purchase the foreign currency to pay for import contracts. This decision was based on a consideration that the foreign currency can be transferred to accounts of charitable funds as targeted assistance.

The respective changes will not significantly affect the international reserves. They were approved in view of the importance of charitable funds, especially under martial law.

As previously reported, as from 6 September 2022, in order to make FX settlements, legal entities must first use foreign currency they have at their disposal. After using its own FX funds, a company can buy foreign currency from the FX market of Ukraine.

opening accounts for servicemen and servicewomen by banks

The NBU has expanded the list of documents, based on which banks can open accounts for servicemen and servicewomen and carry out their identification and verification on the basis of a military ID card of an officer, general, and admiral.

refinancing of banks

Currently, the banking system liquidity is at an all-time high, remaining stable despite the full-scale war that has been raging for over eight months. Compared with the beginning of March, when on some days the volume of refinancing loans to banks exceeded UAH 160 billion, the debt of solvent banks under those loans dropped almost threefold and totaled UAH 54.4 billion on 4 November 2022.

With this in mind, and taking into account the early repayment of the refinancing loans and successful passing of the challenge of the full-scale war by the banking sector, the unsecured refinancing, which allowed to maintain the stability of the financial system at the beginning of the war, has currently lost its relevance. As a result, the NBU has suspended the unsecured refinancing transactions with banks. At the same time, banks will continue to have access to conventional secured refinancing loans.

The NBU will continue to fine-tune the FX and capital restrictions and other provisions specified by NBU Board Resolution No. 18 (as amended), taking into account above all the need to preserve the macrofinancial stability and meet the priority needs of the defense and economy, as well as to protect the country’s international reserves.  Finding the right balance will allow to maintain the financial stability despite the full-scale war, without interfering with further adaptation of businesses and households to current conditions. 

Said changes and other updates were approved by NBU Board Resolution No. 227 On Amendments to Certain Regulations of the National Bank of Ukraine dated 4 October 2022, which took effect on 5 November 2022.

Some amendments on the unsecured refinancing were also made by NBU Board Resolution No. 228 On Amendments to NBU Board Resolution No. 22 dated 24 February 2022 and Certain Issues on the Form of Contract Conclusion dated 4 November 2022. The document also entered into force on 5 November 2022.

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