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Ukraine’s parliament blocks bank reform

Foreign investors eye record NPL stocks; judicial flaws hinder default resolution.


Vitaly Vavryschuk, head of financial stability at the National Bank of Ukraine

Ukraine’s parliament has dealt a blow to banking sector reform efforts by striking down a draft law designed to tackle corruption and weak governance at the country’s state-owned lenders.

The IMF-backed bill, which had been in the works for more than 18 months, mandated the introduction of independent supervisory boards at Ukreximbank and Oschadbank. Ukraine’s largest public-sector bank, Privatbank, has had independent directors since its nationalization in December 2016.

Vitaly Vavryschuk, head of financial stability at the National Bank of Ukraine (NBU), described the voting down of the bill at the end of March as “a huge disappointment”.

“This is a crucial issue for the NBU and the finance ministry,” he added. “We urgently need to insulate state banks from politicians, from government, from anyone who wants to influence their decision-making processes.”

Ukraine’s state-owned banks have long been notorious for poor governance and politically motivated lending. Reformists had hoped that the appointment of independent supervisory boards would pave the way for the replacement of senior management.

Getting the bill past vested interests in Ukraine’s parliament, however, was always likely to prove challenging.

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