Mechanism for regulating over-the-counter transactions with foreign currency-denominated government bonds: discussion with the market

An open committee meeting was held, at which market participants discussed proposals for a draft decision by the National Securities and Stock Market Commission on the regulation of over-the-counter transactions with internal government bonds denominated in foreign currency.

The proposed changes are an initiative of the National Bank of Ukraine and are provided for in the updated Memorandum of Cooperation between Ukraine and the International Monetary Fund.

The meeting was attended by representatives of professional associations, banking and financial institutions, including the Settlement Center, the Independent Association of Banks of Ukraine, PrivatBank, OTP Bank, Ukrsibbank, and other market participants.

In total, the NSSMC had received comments and suggestions from 13 organizations. Most of them were taken into account in the updated version in order to improve the effectiveness of the mechanism. Among the key changes is the introduction of exceptions for banking institutions. This is because issues related to settlements for transactions with foreign currency-denominated government securities (OVDP) involving banks are regulated by NBU regulations.

At the same time, Ukrainian legislation imposes restrictions whereby legal entities holding foreign currency-denominated government bonds are not allowed to sell them.

The NSSMC notes that these restrictions are a consequence of the current provisions of the National Bank’s regulatory policy. In this regard, the Commission plans to re-approach the regulator to resolve this situation and ensure the proper implementation of the mechanism within the framework of Ukraine’s commitments to the IMF.

The NSSMC also urges market participants to contact the NBU directly as the relevant regulator for currency control and transactions in the event of any disputes.

An updated decision, revised to take into account most of the suggestions received, was approved following discussions at the open committee meeting and will be submitted to the Commission in the nearest future.