NBU relaxes its tight grip on early repayment of foreign loans and restricts trading in foreign securities

NBU relaxes its tight grip on early repayment of foreign loans

With effect from 6 October 2023, the National Bank of Ukraine (NBU) permitted the resident borrowers to prepay principal and interest (whether by way of acceleration, voluntary or by agreeing shorter repayment terms) under foreign loans provided, however, that such loans or a portion thereof:

• have been extended, guaranteed, insured or otherwise covered by the international financial institutions or foreign export credit agencies or other financial institutions whose shareholders include any foreign state or a development bank which, in turn, is fully or partially owned by foreign state; and
• have been actually disbursed to the accounts of resident borrower after 20 June 2023. The changes follow NBU's efforts to water down harsh capital and exchange controls and give additional flexibility to resident borrowers in managing debt obligations under cross-border loans.

Trading in foreign securities has been further restricted

NBU has prohibited the banks from disposing of foreign securities and/or taking other actions that could result in the transfer of foreign securities to the residents and non-residents. However, the trading restriction does not apply to the sale and purchase of foreign securities between banks and non-residents under conditions that the settlements between the parties are provided for in monetary form and carried out either through foreign accounts and/or by making cross-border transfers.

We generally note that the wording used in the relevant regulation is drafted very broadly and may be construed inconsistently by the banks. Specifically, the banks may argue that the prohibition stretches far beyond the own bank’s operations and effectively captures all transactions with foreign securities carried out by any entities or individuals via bank.