01 December 2016, Thursday, 14:56 43

NBU Initiating Application Of New FX Regulation

The National Bank of Ukraine (NBU) has moved mounted an initiative to apply a new model of foreing exchange regulation.

Ukrainian News Agency learned this from an NBU’s statement.

The NBU has presented a concept paper on a new foreign exchange regulation model and a roadmap for its implementation.

The new model is not only more liberal than the current one, but also is more in line with international practice, Directive 88/361/EC on free flow of capital and the Ukraine – European Union Association Agreement.

The new FX regulation model will be implemented with help of new legislation, which will replace obsolete Decree of the Cabinet of Ministers of Ukraine On Foreign Exchange Regulation and Foreign Exchange Control System of 1993 and numerous legal acts.

Since early November, a working group has been drafting new legislation with the participation of experts engaged by the European Commission within the EU-FINSTAR project.

“As a result, a new law On Foreign Exchange will be drafted, a single framework law outlining the guidelines on FX regulation in the country. At the same time, specific provisions will be introduced at the level of delegated legislation,” said NBU Deputy Governor Oleh Churii.

Liberalisation of the FX regulation system on the way to the target model will be performed in several stages which though can be simultaneous.

At the initial stage, the central bank is to lift the limits for export and import operations and direct foreign investments aimed in order to improve Ukraine’s export capacities.

At the next stage, limitations for portfolio investments and debt capital flows is to be abolished.

At the last stage, all obstacles for foreign financial transactions of individuals are to be removed.

The easing of temporary restrictions shall not lead to the inflation exceeding the NBU targets.

The bill will be submitted to the Verkhovna Rada for consideration in the second quarter of 2017.

As Ukrainian News Agency earlier reported, the central bank in mid-November relaxed the temporary FX restrictions for banks and clients.

In particular, the regulator allowed banks to perform their own stock exchange transactions with financial derivatives for which the underlying asset is foreign currency or its exchange rate.

The regulator also allowed banks participating in international payment systems to purchase and transfer foreign currency based on individual licences issued by the NBU for the purpose of placing a security deposit in foreign currency on accounts of international payment systems held abroad.

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