Rada approves bill to improve governance of state banks

Ukraine’s parliament, Verkhovna Rada, voted on July 5
to approve the new principles of supervisory board formation for state banks.
The bill was supported by 263 lawmakers out of a 226-vote majority needed. The
adopted law clarifies the definition of state banks, excluding the clause that
a state bank is created by the Cabinet. The law also stipulates that the
supervisory board of a state bank should consist of nine members, of which six
are independent and three are nominated by the president, cabinet and
parliament. The position of the board’s head can be only occupied by an
independent member. The selection of independent board members is performed by
an agency with at least ten years of international experience of a bank
executives search. Independent board members are approved to their positions by
a commission consisting of three representatives of the cabinet, one of the
president and one of the parliament.

Such changes were a part of a strategy of reform of
state-owned banks, presented by MinFin in February, and were aimed at making
the banks independent of power brokers. Nowadays, the board of all state banks
consists of 15 members, all of which should be Ukrainian citizens, with equal
representation of the president, parliament and cabinet.

Alexander Paraschiy: This is a
positive development, and even an unexpected one, given that previous attempts to adopt such changes failed
due to insufficient support from coalition MPs. When the law is implemented,
Oschadbank (OSCHAD) and Ukreximbank (EXIMUK) will get a chance to become
independent of policy makers in their lending activity, making their balance
sheet stronger. Improved corporate governance will bring the banks closer to
the entrance of IFIs into their equity, as is assumed by MinFin’s strategy.
That allows us to remain positive about Oschadbank and Ukreximbank Eurobonds.