Ukraine central bank approves ForEx forward operations

The Council of the National Bank of Ukraine (NBU) has approved foreign exchange liberalization measures that allow for forward banking operations, the NBU said in a June 16 press release. In particular, the regulator extended forward operations to all foreign currencies from only freely convertible currencies previously. It also lifted limitations on such operations to within a year (365 days). Forward operations are now also allowed for legal entities running import/export operations.

As another important step taken by the central bank, banks can buy/sell banking metals at the interbank ForEx market under TOD, TOM, SPOT, forward, and SWAP conditions not only in hryvnias, as previously, but also in foreign currencies. On the global markets, banks now can run operations with banking metals not only with freely convertible currencies, but with any currency. 

Finally, the NBU lifted limitations on non-cash ForEx operations for individuals. In particular, individuals can convert currencies on their accounts within a day without any limitations. Previously, they were allowed to convert only freely convertible currencies once per day.

These measures take effect June 26.

Alexander Paraschiy: These are very important steps for the central bank. Forward operations are critical for replacing restrictive measures at the ForEx, which are burdensome for businesses. At the moment, exporters are obliged to return their proceeds within 180 days of delivery of products and are requested to sell 50% of their foreign currency proceeds. These measures enable the NBU to predict foreign currency flow and understand national currency exchange rate prospects.

Throughout the world, the forward market serves as an instrument for measuring ForEx tendencies and hedging ForEx risks for players. As soon as the forward market is fully established in Ukraine, the ForEx restrictions will have lost any relevance and the central bank has taken the first step in this direction. Starting June 26, importers/exporters will start hedging their foreign currency risks against the hryvnia. However, to make the forward market totally functional, a market-maker is needed. So far, it’s not clear who could take this role.