It covers payment methods and information on, banking systems, foreign exchange controls, and U.S. and correspondent banking.
Methods of Payment
Payment methods and terms vary depending upon the U.S. company’s business model and relationship with its Ukrainian trading partner. For new-to-market companies, requesting advance payment for goods and services from a Ukrainian customer may be a prudent course to follow until both parties establish a record of payment. While all internationally acceptable forms of payment are available in Ukraine (e.g. checks, bills of exchange, letters of credit, and collection arrangements), the recommended method of receiving payment for U.S. exports is through an irrevocable letter of credit.
Payment transfers in foreign currencies are made either through a cover at a foreign partner-bank or the International Settlements Department of the National Bank of Ukraine (NBU). The EBRD trade finance partners in Ukraine are Credit Agricole Ukraine, Oschadbank, OTP Bank, Raiffeisen Bank Aval, State Export-Import Bank of Ukraine, Ukrsibbank. To conduct hard currency transactions a bank has to be authorized by the NBU. All authorized Ukrainian commercial banks are members of SWIFT (Society for Worldwide Interbank Financial Telecommunications).
Ukrainian legislation allows settlement under export or import contracts between a Ukrainian resident and a non-resident to be carried out in foreign currency as well as in hryvnia. The foreign currency proceeds of a Ukrainian resident under an export contract (except for export of services, other than transport and insurance services, and intellectual property rights) must be collected on such resident’s bank account within 365 days from the date of the customs clearance of the exported goods.
For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide available at https://www.trade.gov/trade-finance-guide-quick-reference-us-exporters.
The Ukrainian banking sector has a two-tier structure made up of the National Bank of Ukraine (NBU) and commercial banks of various types and forms of ownership. The NBU is responsible for monetary policy, licensing of commercial banks, and the oversight of their activities. Current Ukrainian legislation distinguishes between “universal” (general) commercial banks and “specialized” commercial banks, with the latter including savings, investment, mortgage, and settlement (clearing) banks. A commercial bank carries out its banking activities under a banking license issued by the NBU.
In 2020, Ukraine’s 73 operating banks earned UAH 41.3 billion ($1.5 billion) in net profit, 29 % less than in 2019 mainly due to expected losses provisions. Nearly 90 % of the banking sector profit was generated by five banks, whereas more than half of that volume was earned by Pryvatbank. According to Kyrylo Shevchenko, the Governor of the NBU: “The banking sector is sufficiently capitalized. The regulatory capital adequacy of the sector for the second half of 2020 remained significantly higher – about 23% against 10% of the minimum required level. This allows banks to maintain their ability to absorb losses and continue lending to households, SMEs and large businesses during the crisis.”
Even though Ukraine has been very successful in cleaning its banking sector over the last six years, non-performing loans (NPLs) remain a huge problem. When the reforms started in 2014, Ukraine’s banks had the highest share of bad debt in the world. And it is still high but falling steadily.
Today the aggregate level of NPLs in the sector is 40%, down from over 50% at the start of 2020. The privately owned banks have NPLs of 13 %, the foreign-owned banks have 27 %, but the state-owned banks have 43 %.
On July 1, 2020, the NBU became a regulator for a majority of non-banking institutions in Ukraine after the Law “On Amendments to Some Legislative Acts of Ukraine on the Improvement of the State Regulation in the Financial Services Markets” came into effect after being adopted by Verkhovna Rada on September 12, 2019. As such, the NBU will oversee insurance, leasing, factoring companies, as well as credit unions, pawnshops and other financial companies.
Foreign Exchange Controls
In 2021, the NBU has made another relaxation of its foreign exchange regulations and eased restrictions concerning the purchase of foreign currency by local businesses (companies and individual entrepreneurs).
Starting from July 20, 2021, Ukrainian businesses will be allowed to purchase foreign currency up to the amount equivalent to EUR 100,000 per day without having to justify such purchase by contractual obligations and submit supporting documents to their account banks.
At the same time, for most transfers of foreign currency from Ukraine abroad (including foreign currency purchased within the aforementioned limit), Ukrainian companies will still be required to justify such transfers by contractual obligations and to provide relevant supporting documents to banks.
In addition, cross-border transfers of foreign currency purchased within the aforementioned limit for the purpose of investing abroad, making loans to foreign borrowers or allocating funds on foreign bank accounts will still be limited by the statutory cumulative cap of EUR 2 million per calendar year.
US Banks & Local Correspondent Banks
Citi Bank is the only American bank currently operating in Ukraine. The bank is located at: 16-G Delovaya Street, Kyiv; Tel.: +38 (044) 490-10-00.