The National Bank of Ukraine (NBU) welcomes the decision of the Verkhovna Rada of Ukraine to support the landmark reform of currency regulation. The total of 228 MPs voted in favor of the Law On Currency and Currency Operations in the second reading and as a whole.
This decision of MPs empowers Ukraine to make a long-awaited shift from outdated, repressive and complicated currency regulation to free currency operations without restrictions and to affirms Ukraine’s place in Europe.
“The Law On Currency and Currency Operations will create favorable, transparent and safe conditions for doing business in Ukraine and open doors to foreign investors. Ukrainians in their turn will have the right to invest in securities on global markets and deposit funds to bank accounts in any bank in the world,” noted NBU Governor YakivSmolii.
The adopted Law prescribes that currency restrictions will be lifted gradually and carefully, and under favorable macroeconomic conditions in order to preserve the financial stability until complete freedom of currency operations is achieved based on the principle “everything that is not explicitly forbidden by law, is allowed”. At the same time, the Law gives the NBU “green light” for more expedient liberalization of the currency regulation. The most damaging restrictions, for example, concerning investments abroad and foreign trade operations will be lifted as soon as the Law enters into effect.
The NBU Governor also noted that the Law would ensure price and financial stability and respectively a safe business environment. For that purpose the approved Law authorizes the NBU to respond timely and effectively to signs of crisis and to prevent them regardless of its nature in line with the best practices of foreign central banks.
Specifically, the Law details that in case of unstable financial conditions in the banking system, deterioration of the balance of payments of Ukraine and other adverse events posing a threat to the financial stability, the NBU Board will make decisions on introducing initial protective measures. These limitations will be temporary and last up to six months.
The Law also provides that in order to extend effective currency restrictions or introduce a new restriction, provided less than six months have passed after cessation of a similar preceding measure, the NBU Council will be required to confirm existence of signs of a crisis. Furthermore, the Law prescribes accountability and public exposure of the NBU during implementation, extension and performance assessment of protective measures.
The Law will come into effect on the next day after its publication and will be implemented in seven months after the transition period as of the effective date. In particular, the harmonization of the NBU regulations in line with the new Law will continue during six months of the transition period, afterwards the NBU will release these regulations to the general public. This Law will be implemented in 30 days after the public release of respective regulations.