Rada approves IMF-committed laws on banks and deposit guarantee system

Ukraine’s parliament approved on June 30 in the final
reading two bills which are among the structural benchmarks in the latest IMF
memorandum. The first bill, #4367, improves the corporate governance and
internal control practices of Ukrainian banks, grants more power to the central
bank to control such practices, strengthens requirements for bank beneficiary
owners, and introduces new liquidity and capital buffer requirements. Also, the
central bank is granted the power to calibrate the capital and liquidity
requirements of a bank based on its business model and risk profile.

The second bill, #4546, widens the instruments of the
Deposit Guarantee Fund to recover the assets of insolvent banks (including the
cancellation of certain bank’s deals, the ability to claim losses related to a
bank’s liquidation from former top managers and owners of failed banks) as well
as improves the procedures for liquidating failed banks.

Alexander Paraschiy: With the adoption of such bills, Ukraine has implemented most of the
commitments (structural benchmarks) listed in the memorandum with the IMF of
June 2020. This significantly raises the chance for a successful first review
of the on-going Stand-by program this summer. The key risks for such review now
are in the anti-corruption area and the questions related to the independence
of central bank’s policies. In any case, now, the upcoming IMF deal looks much
more likely.