Rada approves draft of IMF required banking bill

Ukraine’s parliament voted on May 20 to approve the
first draft of a law on changes to banking legislation (#4367) which is among the
structural benchmarks of the IMF’s ongoing SBA program. A total of 258 MPs
voted for the draft, out of 226 needed. In accordance with the IMF memorandum,
the bill introduces capital buffers for banks, strengthens requirements for
banking licensing and requirements for banking management, owners and
supervisory board members (including introducing the notion of collective
suitability of the supervisory board).

Alexander Paraschiy: This is one
more step towards the new IMF tranche, after the Rada’s last month approval in the first
reading of a law on strengthening responsibility for fraudulent e-declarations
by officials.

Although approval of these two laws in full is very
likely in the next few weeks, that won’t be enough for Ukraine to meet all the
structural benchmarks and address new outstanding issues that are necessary for
a smooth review of the program by the IMF. Among the key outstanding issues,
the most critical look to be the questions related to the anticorruption
infrastructure and judicial reform, including appointment of  an
anti-corruption prosecutor and changes to the selection process of the members
of the High Council of Justice. The government has less than two months to implement
all the necessary changes and secure the first review of the SBA program, we
estimate. That said, we assess the probability of success with the current IMF
program as slightly more than 50%.