Banking and Finance : Legal Alert September 2019

On 12 September 2019 the “Split” Law was adopted in the second reading[[1]](https://www.integrites.com/publications/banking-and-finance-legal-alert-september-2019/#_ftn1) supported with 296 of deputies’ votes. This step is expected to remove the overregulation and reduce the number of regulators on non-banking financial markets by liquidation of the National Commission for State Regulation of Financial Services Markets and splitting its functions between the National Bank of Ukraine and the National Commission for Securities and Stock Market.

The “Split” Law is now being prepared for signing and will enter into force upon its publication, however it will become fully operative only starting from 1 July 2020.

Ukraine undertook an obligation before the International Monetary Fund to adopt the “Split” Law according to the Memorandum on economic and financial policy within the new program for 2018-2020 No. 23751/0/2-18 dated 05 December 2018[[2]](https://www.integrites.com/publications/banking-and-finance-legal-alert-september-2019/#_ftn2).

[[1]](https://www.integrites.com/publications/banking-and-finance-legal-alert-september-2019/#_ftnref1) Please see the draft law of Ukraine No. 1069-2 “On amending of certain legislative acts of Ukraine for improvement of state regulation of financial services markets” dated 06 September 2019 (the “Split” Law”)

[[2]](https://www.integrites.com/publications/banking-and-finance-legal-alert-september-2019/#_ftnref2) Please see the Memorandum on economic and financial policy within the new program for 2018-2020 No. 23751/0/2-18 dated 05 December 2018

With effect from 10 September 2019, the NBU has lifted the existing restriction (5 million Euro per month) on repatriation of funds received by foreign investors from the sale of securities, participatory interest and charter capital decrease in Ukrainian companies[[1]](https://www.integrites.com/publications/banking-and-finance-legal-alert-september-2019/#_ftn1).

In addition, Ukrainian legal entities and individual entrepreneurs shall not be limited by the existing threshold of EUR 2,000,000 when transferring to non-residents proceeds from the sale of their property in Ukraine and income from such property. This is subject to provision to the servicing local bank of certain documents evidencing ownership by the non-resident of the property and/or the terms of its alienation.

Also, the Regulator supplemented the list of transactions which may be executed through non-residents` current accounts opened in Ukraine, namely with respect to:

• current accounts of non-resident legal entities (both in foreign and Ukrainian currency) – it has been allowed to

credit funds received from the sale of securities, real estate, participatory interest and other property as well as proceeds and other funds received in connection with it, provided that such property is not recognized a foreign investment;

• current accounts of non-resident individuals (in Ukrainian currency) – it is allowed to credit dividends,

securities interest income and other proceeds in respect of their property located in Ukraine, provided that such payments are not connected with alienation, sale, liquidation or decreasing of charter capital.

This step is expected to give additional flexibility to foreign investors in managing their funds both in foreign and Ukrainian currency and, as a result, should accelerate foreign investments into Ukraine.

In addition, the Resolution No. 113 clarifies certain FX operations made by corporate entities and individual entrepreneurs.  Namely the operations of Ukrainian legal entities for acquisition of foreign-issued securities and domestic government loan bonds of Ukraine should comply with the established investment limit up to EUR 2,000,000.

[[1]](https://www.integrites.com/publications/banking-and-finance-legal-alert-september-2019/#_ftnref1) Please see NBU Resolution No. 113 “On Approval of Amendments to the Regulation on Protection Measures and Determination of the Procedure for Conduct of Particular Foreign Currency Transactions” dated 9 September 2019

With effect from 17 August 2019, the NBU has introduced easements in calculation of maximum credit exposure ratio per one counterparty. For the said purpose Ukrainian banks may now additionally recognise guarantees and irrevocable standby letters of credit issued by their parent banks, or the banks of the same international group, provided that the issuing bank has an international investment credit rating confirmed by Standard & Poor’s, or analogous rating by Moody’s Investors Service or Fitch IBCA[[1]](https://www.integrites.com/publications/banking-and-finance-legal-alert-september-2019/#_ftn1). Previously only the issuing banks of at least AA- investment rating according to Standard & Poor’s, Moody’s Investors Service or Fitch IBCA could be considered for the said purpose.

Moreover, the NBU will not bring remedial action against the banks which failed to comply with respective prudential standards in the period from 2 July 2019 to 17 August 2019 due to the mentioned guarantees or letters of credit being disregarded.

[[1]](https://www.integrites.com/publications/banking-and-finance-legal-alert-september-2019/#_ftnref1) Please see NBU Resolution No. 108 “On Amendments to the Procedure for Regulation of Bank Activities in Ukraine” dated 15 August 2019