The National Bank of Ukraine (the “NBU”) adopted Regulation No. 434 on “Procedure for carrying out foreign currency swap transactions by the NBU”, dated 5 December 2011 (the “Regulation”). As from 16 December 2011, Ukrainian banks may carry out currency swap transactions with the NBU in accordance with the procedure set out in the Regulation.
Currency swap transactions shall be performed in two stages. The maximum duration between stage one and stage two is 3 months. During stage one the NBU buys foreign currency from a bank in exchange for national currency (the “Hryvnia”). During stage two the NBU buys Hryvnia back, thus closing the position, at an agreed forward exchange rate calculated according to the formula defined in the Regulation*.
The minimum size of the currency swap is 10 million Hryvnia. The NBU can terminate the currency swap earlier if the counterparty bank breaches regulation relating to banks (including inter alia liquidity/reserve limits, etc.), currency control or anti-money laundering regulations or fails to perform its obligations under any other agreements it has with the NBU.
To be eligible to conduct swap transactions with the NBU banks should meet the following criteria: (i) the relevant bank must have maintained and carried out business under a banking licence and general licence for foreign currency transactions for more than one year; and (ii) the relevant bank cannot to be in default in respect of any other agreements it may have with the NBU.
Law: Regulation of the National Bank of Ukraine No. 434 on “Procedure for carrying out foreign currency swap transactions by the NBU”, dated 5 December 2011.
*Forward Exchange Rate Formula
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FR – forward rate;
IR – intervention exchange rate of the NBU for the purchase of the respective foreign currency on the day when the first stage of the swap transaction is performed; or if the intervention exchange rate is not available - official Hryvnia exchange rate set by the NBU on the same day;
IHr – interest rate on Hryvnia for a certain term calculated over a one year period;
Ifc – interest rate on foreign currency for a certain term calculated over a one year period;
D – calendar days between the first and the second stages of the swap transaction (the first and the last day of the transaction are considered as one day);
DHr – calendar basis for the calculation of interest on Hryvnia – 365 days;
Dfc – calendar basis for calculation of interest on the respective foreign currency.
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