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6. Financial Sector

Capital Markets and Portfolio Investment

The Ukrainian government encourages foreign portfolio investment in Ukraine, but Ukraine’s capital and commodity markets remain underdeveloped.  Ukraine’s capital market consists of markets for stocks and for commodities.  Liquidity is limited and investors have few investment options.  The financial market includes ten stock exchanges, a settlement center, two depositories, and a securities market regulator.  Government bonds constitute 95 percent of the trades.  A few corporate securities are listed, but the volume of their trades is insignificant.  With limited exceptions, only Ukrainian-licensed securities traders may handle securities transactions.  In January 2020, China’s Bohai Commodity Exchange acquired a 49.9% stake in one of Ukraine’s leading stock exchanges, JSC PFTS Stock Exchange.  The commodity market in Ukraine does not have a transparent regulatory framework.

The regulator of Ukraine’s capital market, the National Securities and Stock Market Commission, lacks financial and operational independence and is not a signatory to the Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information of the International Organization of Securities Commissions.  Ukraine has been a member of the International Organization of Securities Commissions (IOSCO) since 1996.  In February 2021, a new draft law “On the National commission on securities and stock exchanges” was registered in parliament and is pending consideration.  The law would strengthen the independence and institutional capacity of the Securities Commission and facilitate compliance with IOSCO standards.  Ukraine committed to adoption of the law as part of its IMF program.  In November 2019, Ukraine adopted the so-called “Split” law to regulate the non-banking financial services sector.  The law, which entered into force on July 1, 2020, transitions Ukraine from a sectoral regulatory model to an integrated model, and lays the foundation for the full development of consumer rights protections and market conduct regulations in the financial markets. The law dissolved the National Commission for State Regulation of Financial Services Markets and split up its regulatory functions between the National Bank of Ukraine and the National Securities and Stock Market Commission.  The National Bank of Ukraine now supervises and regulates the insurance market, leasing and factoring companies, credit unions, credit bureaus, pawnshops and other financial companies, while the National Securities and Stock Market Commission regulates private funds, including pension funds, construction financing, and real estate transactions.

For many years, Ukrainian capital markets have struggled due to significant gaps and inconsistencies in the regulatory framework.  In June 2020, parliament passed the law “On amendments to certain laws regarding facilitating investments and new financial instruments,” aimed at restarting Ukrainian capital markets.  The law will bring Ukrainian legislation in line with key provisions of EU laws on capital markets (MiFID II, MiFIR, EMIR, the Settlement Finality Directive, and the Financial Collateral Directive), create a framework for updated capital markets’ infrastructure, and regulate commodity markets and derivatives.  The law is expected to have a transformative effect on Ukraine’s capital markets as it provides for new financial instruments for savings and investment, new tools for risk management, and new requirements for market transparency. The law is expected to enter into force on July 1, 2021.

Credit is largely allocated on market terms, and foreign investors are able to get credit on the local market through a variety of credit instruments.

Money and Banking System

Ukraine’s banking sector has seen remarkable progress following the 2014-2015 crisis thanks in large part to  banking sector cleanup, which resulted in the closure of over 100 banks for insolvency or money laundering activities, and the professionalization of Ukraine’s central bank, the National Bank of Ukraine.  At the end 2020, 73 solvent banks were operating in Ukraine.

Partly due to the Covid-19 pandemic, the number of unprofitable banks ticked up in 2020.  Eight banks were unprofitable in 2020 compared to six in 2019, and two banks were declared insolvent due to non-compliance with capital requirements.  The banking sector in Ukraine reported net profit of UAH 41.3 billion ($1.4 billion) for 2020, roughly a quarter of the profit reported in 2019.  State-owned PrivatBank accounted for more than half of the banking sector’s total profits.  In 2020, banks’ total assets increased by 22 percent to UAH 1.8 trillion ($64 billion), the total amount of loans decreased by 6.8 percent to UAH 963 billion ($34 billion), while total obligations increased by 24.6 percent to UAH 1.6 trillion ($21 billion).

Non-performing loans (NPL) decreased from 48.4 percent in 2019 to 41 percent in 2020 but remain one of the biggest unresolved issues in the banking sector.  State-owned banks wrote off UAH 30.6 billion ($1.1 billion) in local currency loans and $3.1 billion in dollar-denominated loans in 2020, reducing their share of NPLs from 63.5 percent to 57.4 percent.  The share of NPLs in foreign commercial banks decreased from 16 percent to 12.3 percent, and in Ukrainian commercial banks from 18.6 percent to 14.6 percent. Greater oversight by the National Financial Stability Council, along with the National Bank’s new criteria for writing off distressed assets, has improved the banks’ NPL strategies.

Foreign-owned banks may carry out all activities conducted by domestic banks, and there are no restrictions on their participation in the banking system, including operating via subsidiaries.  A foreign company can open a bank account in Ukraine for the purposes of investment operations; otherwise, it needs to register a representative office in Ukraine.  A nonresident private person can open a bank account in Ukraine.  A foreign investor may open an account in a bank operating in Ukraine and transfer in funds for further investment or invest directly into an account of a Ukrainian resident company.

Foreign Exchange and Remittances

Foreign Exchange

The National Bank of Ukraine (NBU) continued in 2020 to liberalize currency controls, which had been put in place to stabilize the Ukrainian foreign exchange market during the 2014 economic crisis.  Under the law “On Currency and Currency Transactions”, which entered into force in February 2019, individuals can purchase foreign currency online and on credit.  The National Bank increased the cap for currency transfers by individuals from EUR 50,000 in December 2019 to EUR 200,000 in February 2021.  The daily limit was raised to UAH 399.9 thousand (or the USD/EUR equivalent).  Currency transfers abroad for legal entities are capped at EUR 2 million a year. The cap includes any outward investments.  According its currency liberalization road map, one of NBU’s priorities is to eliminate foreign currency transfer limits for individuals. Even though many restrictions for foreign currency transactions have been loosened, the new regulations still require Ukrainian banks to monitor most foreign currency transactions.

In 2019, the NBU abolished all restrictions related to the repatriation of dividends. The NBU also cancelled the mandatory sale of foreign currency proceeds by businesses from June 2019.  In addition, it removed the hryvnia reserve requirement banks had to keep for foreign currency purchases, and it now allows unlimited daily purchase of foreign currency by individuals through banks, financial institutions, and via online banking.

The NBU now allows transactions from Ukrainian bank accounts opened by non-resident legal entities. Foreign companies can open, and make payments from, current accounts as well as accumulate and buy foreign currencies using these accounts.

The NBU has developed a road map for removing currency restrictions with the goal of reaching a full capital flow regime.  The roadmap is publicly available on the NBU’s website in both Ukrainian and English:

Further liberalization is contingent on implementation of BEPS legislation and general macro-economic conditions.

The NBU has a floating exchange rate regime, although the NBU may carry out currency interventions to meet two objectives: reducing excessive currency fluctuations and replenishment of international reserves.

Remittance Policies

In 2020, the National Bank of Ukraine doubled the limit for some retail foreign currency remittances, including for investment abroad or foreign deposits, to EUR 200,000 ($230,000) per year.  As long as they comply with the limit, individuals are permitted to remit foreign currency (or the national currency hryvnia) abroad or to current accounts of corporate nonresidents in Ukraine.  The transactions allowed include: investing abroad, depositing funds into one’s own accounts abroad, transferring funds under life insurance agreements, or making loans to nonresidents.  In 2020, individuals transferred about EUR 274 million ($315 million) abroad.  The NBU aims to completely remove the limit on international investments by individuals, subject to the full adoption and implementation of the BEPS legislation.

Sovereign Wealth Funds

Ukraine does not maintain or operate a sovereign wealth fund.

9. Corruption

Ukraine has numerous laws to combat corruption by public officials, and following the Revolution of Dignity in 2014, the government launched new anti-corruption institutions, including the National Anti-Corruption Bureau (NABU), to investigate corruption by public officials, the Special Anti-Corruption Prosecutor’s Office (SAPO), the National Agency for Prevention of Corruption (NAPC), and the High Anti-Corruption Court (HACC).

In fall 2020, Ukraine’s Constitutional Court struck down certain provisions of the Law of Ukraine about NABU and the Law on Corruption Prevention (in particular, provisions on e-declarations and on the powers of the National Agency on Corruption Prevention (NACP) related to their verification) as unconstitutional.  The Constitutional Court is also considering cases challenging the constitutionality of the HACC and the Deposit Guarantee Fund.  These rulings have been criticized by the government as corruptly influenced; they have also created new obstacles to new disbursements under the IMF, World Bank and EU assistance programs.  The government and parliament are in discussions with international partners on draft legislation that would restore those aspects Ukraine’s institutional anti-corruption infrastructure struck down by the Court.

The government  began drafting legislation to criminalize the falsification of customs records, and is preparing to launch an agency-wide reform initiative to detect and address internal corruption. Beginning in 2017, the State Border Guard Service (SBGS) reformed ten of its border crossing points, including five along the Polish border and five international airports, using a personnel and process reform model that has been expanded to SBGS Command Staff promotions and is being considered within the State Customs Service.  The National Police of Ukraine is also redesigning its approach to addressing corruption nationwide and within its ranks by standing up a new General Inspectorate Unit.

Foreign businesses, including U.S. companies, continue to identify corruption in many sectors as a significant obstacle to FDI.  Reform of public procurement has been a relative success story, with the introduction of the online ProZorro system providing transparency for most procurement.  Parliament is currently reviewing draft legislation to reform the defense procurement process, pending amendments made to the Law on State Secrets, which will declassify the process.  The energy sector has seen some improvements, including reforms at the large oil and gas SOE Naftogaz, but participants in the sector continue to raise concerns.  Government interference in the corporate governance of Naftogaz is a persistent concern and has now spread to Ukrenergo, Energoatom, and Ukrhydroenergo, among others.  There are allegations of corruption at specific SOEs in a variety of sectors, as well as allegations that external corrupt forces interfere regularly in SOE operations.

There are several NGOs actively involved in investigating corruption and advocating for anti-corruption measures.

Resources to Report Corruption

NABU, established in October 2014, is the appropriate resource for the reporting of high-level corruption.

Government of Ukraine contact for combating corruption:

National Anti-Corruption Bureau
3, Vasyl Surikov St, Kyiv, Ukraine 03035
Hot-line:  0-800-503-200

Corruption Reporting eForm:

Contact at Transparency International:
Mr. Andriy Borovyk
Executive Director
Transparency International Ukraine
37-41 Sichovykh Striltsiv Street, 5th floor,
Kyiv, Ukraine 04053+38(044) 360-52-42

11. Labor Policies and Practices

Ukraine has a well-educated and skilled labor force of about 20 million people with a nearly 100-percent literacy rate.  Ukraine has a reported population of 41.9 million people as of January 2021.  Ukraine’s official unemployment rate was 9.3 percent in Q3 2020, although unemployment in some regions, particularly in rural areas, remained significantly higher.  According to the government’s statistics, there were about 1.64 million unemployed workers in Q3 2020.  However, only 25 percent were officially registered with the State Employment Service.  Wages in Ukraine remain low by Western standards.  In January 2021, the minimum monthly wage was raised to UAH 6000 ($215) from UAH 4,723 ($193).  The real average monthly wage increased by 10.2 percent year-on-year to UAH 14,179 ($506).  The highest wages are traditionally in the financial and aviation sectors; the lowest wages are paid to food service and public health workers.

Following unrest in Belarus, the Zelenskyy administration issue a decree obligating the Cabinet of Ministers to streamline the immigration and registration process for highly qualified IT specialists and entrepreneurs fleeing Belarus. The GoU estimated that, by March 2021, nearly 40 companies and 2,000 new IT specialists from Belarus had relocated to Ukraine.

Ukrainian law allows workers to organize, and unions are prevalent in most industries.  The law provides most workers with the right to form and join independent unions and to bargain collectively without previous authorization.  By law, trade unions are equal, and a union’s establishment does not require government permission.  Within classic sectors of the economy, sector-specific collective bargaining agreements involve representative employers’ associations (e.g., chemical industry employers), sector trade unions, and some participation of the government through the Ministry of Social Policy.  Such agreements can also take place at the regional level.  The independence of unions from government or employer control, however, has been disputed by certain labor groups.  Independent trade unions alleged that the country’s largest trade union confederation, the Federation of Trade Unions of Ukraine (FPU), enjoyed a cozy relationship with employers and members of some political parties.  Unions not affiliated with the FPU were denied a share of disputed trade union assets inherited by the FPU from Soviet-era unions.

The law provides for the right to strike “to defend one’s economic and social interests,” as long as strikes do not jeopardize national security, public health, or the rights and liberties of others; the government generally respects this right.  The law does not extend the right to strike to personnel of the Prosecutor General’s Office, the judiciary, armed forces, security services, law enforcement agencies, the transportation sector, or public servants.  Workers who strike in prohibited sectors may receive prison terms of up to three years.

The State Labor Service is responsible for enforcing labor laws, although the number of planned and unplanned inspections is low.  Experts assess the number to be inadequate relative to the size of the Ukrainian economy.  The National Mediation and Reconciliation Service (NMRS) is responsible for mediating labor disputes.  According to official Ukrainian statistics, during 2020 the NMRS resolved 377 labor disputes that involved 1.4 million employees and 6,778 economic entities.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics


Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $142,071 2019 $139,100
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $489 2019 $596 BEA data available at

Host country’s FDI in the United States ($M USD, stock positions) 2018 $ 0.6 N/A N/A BEA data available at
Total inbound stock of FDI as % host GDP 2018 29.4% 2019 33.9% UNCTAD data available at

* Source for Host Country Data: State Statistics Service of Ukraine

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $48.934 100% Total Outward $2,881 100%
Cyprus $14,958 30.5 % Cyprus $1,093 38.0%
Netherlands $10,004 20.4% Latvia $81.0 2.8%
Switzerland $2,758 5,6% Russia $67.6 2.3%
Germany $2,301 4.7% Lithuania $8,4 0.3%
Other $15.959 32.6 Switzerland $7.7 0.26%
“0” reflects amounts rounded to +/- USD 500,000.

Source: State Statistics Service of Ukraine

Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries 152 100% All Countries 78 100% All Countries 74 100%
USA 98 64.1% USA 71 90.2% Austria 96 130.3%
Austria 96 63.1% Cyprus 21 26.4% France 56 76.0%
France 56 36.8% % USA 27 36.4%
Cyprus 24 15.5% Other countries -13 Cyprus 3 3.9
Germany -102 -% Germany -102
Other countries -6

Investment Climate Statements
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