NBU may lift ban on dividends transfer abroad

The National Bank of Ukraine (NBU) reported on April 28 it is collecting information on the amount of dividends that subsidiaries of international holdings wish to pay abroad, aiming at lifting the ban on dividends repatriation. A ban on purchases of hard currency for dividend repatriation abroad was introduced in late 2014, during a currency shock.

The NBU reported that it has requested commercial banks to collect by May 20 information from its clients on their intention to pay dividends abroad. It also requests potential dividend payers to select a single bank that will perform the dividend repatriation operation. Based on the collected information, the NBU said it will design a schedule for dividend transfer.

Alexander Paraschiy: The imposed restriction on collection of earned profit is clearly one on the most painful regulations for international investors and one of the key impediments for Ukraine to attract new FDI. As soon as hard currency becomes easily available in Ukraine, it will indeed be high time to remove such a ban. Meanwhile, it’s not clear from the NBU announcement whether it will completely lift the ban on dividend flow, or if it will just allow international investors to repatriate the earlier accumulated retained earnings.

We estimate the total 2014-2015 earnings of subsidiaries of international companies were about UAH 28-31 mln, or USD 1.1-1.2 bln based on current exchange rate. Out of this amount, we expect the international investors may be willing to claim abroad USD 0.4-0.5 bln. Such one-off outflow from the Ukrainian banking system and ForEx market might be painful for banks and the Ukrainian currency. Therefore, we expect the NBU will design a schedule to extend dividend outflows for a couple of months, possibly starting in June, if currency stability sustains itself.