Opening a Bank Account in Ukraine

Shawn Levsen, U.S. Department of Commerce

Reprinted from BISNIS BULLETIN--March 1997

Ukraine has implemented a strict regime for regulation of banking procedures and U.S. companies will have to meet a variety of demanding legal and administrative requirements when they establish banking relationships there. These requirements have made banking cumbersome. Nevertheless, a number of Western and local banks offer services to U.S. and other foreign companies doing business in Ukraine.

Nearly 100 Ukrainian Banks are authorized to deal in foreign currency

The process for opening a bank account in Ukraine is regulated by the May 1996 National Bank of Ukraine's (NBU) instruction "On the Procedure of Opening Accounts in the National or Foreign Currency of Ukraine." Holders of hard currency accounts must also have another account denominated in hryvnia, the Ukrainian currency. The process of opening an account is complicated and somewhat intrusive, and requires documentation from your state government. An account permitting international transfers requires a license from the NBU. Nearly 100 Ukrainian banks are authorized to deal in foreign currency. Credit Lyonnais, currently the only Western bank licensed in Ukraine, will soon be joined by America's Chase Manhattan and Commerzbank AG of Germany.

Types of Accounts

Several types of bank accounts are authorized under the NBU instruction. There arc two categories--one for legally resident entities and one for those that are not fully resident in Ukraine. Resident entities are entitled to maintain "settlement," "current," "loan," "deposit," and "budget" accounts. The settlement account is used to make payments that are allowed in the account holder's charter. It can also be used to transfer funds to and from foreign entities. Companies usually open at least two settlement accounts, one in a hard currency, and another in hryvnia. Current accounts are essentially the same as settlement accounts but are intended for use by non-commercial entities. Loan accounts are for administering borrowed or loaned funds. The deposit account is used as a savings account. The budget account is for receiving funds from Ukrainian government authorities.

Two types of accounts arc specifically intended for nonresident entities. The "N" account is for non-resident representative offices. It can be used only for maintenance of the office. It cannot be used to conduct business (no contracts, international transfers, or exchanges). The "P" account is used by permanent representative offices that do not exist as a separate legal entity. It is similar to the settlement account, but cannot be used for exchange or capital transactions.

Opening an account is relatively inexpensive, the cost depending on the bank and the type of account. Hard currency accounts can cost up to $150. Fees for opening hryvnia accounts are lower. At least one Ukrainian institution, Percombank, offers no-fee accounts.

Transferring Funds

International transfers have become a standard practice and generally take one to three business days. Many banks in Ukraine have correspondent relations with banks in the United States. U. S. banks can transfer funds to a Ukrainian recipient, assuming that the recipient has a hard currency account and is authorized to receive foreign funds. Fees vary, from Ukraine Bank which charges no fee, to Ukrbank which charges 2 percent on transfers. Once they have reached their destination, 50 percent of the transferred funds must be converted into local currency and placed in a hryvnia account. The balance may be placed in a hard currency account.

Transferring funds from Ukraine is more difficult. For imports, documentation supporting a foreign purchase is required. For repatriated profits, a 15 percent tax is levied.

The Ukrainian Government encourages the use of wire transfers for domestic transactions. Although the system has some shortcomings, it is generally more secure and less costly than using cash. There is a record for tax purposes, and the cash withdrawal fee of about 1 percent is avoided.

International fund transfers are now a standard practice in Ukraine

Various restrictions apply to the withdrawal of funds from a bank account. There is a monthly limit on the amount of cash that can be withdrawn and the purposes for which it can be used. NBU regulations also specify when companies can withdraw funds from their accounts. Many companies report only being able to take funds from their accounts for payroll, travel, and necessary fees. Banks are authorized to refuse withdrawals they deem to be "unjustified."