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UPDATE 1-Ukraine assembly amends banking law on IMF demand

Published 07/24/2009, 08:58 AM
Updated 07/24/2009, 09:00 AM

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KIEV, July 24 (Reuters) - Ukraine's parliament passed amendments on Friday to its banking law aimed at making the management of ailing banks more efficient and effective, as required by the IMF before it gives Kiev any more funds.

The changes were passed by 322 of 450 deputies in the assembly, sitting in an extraordinary session. It remains to be seen whether the amendments meet the IMF's requirements, which have not been made public.

Ukraine and the IMF agreed on a $16.4 billion standby programme last November and Kiev has already received over $7 billion, though lengthy talks over some IMF conditions have delayed the disbursement of some of the funds.

The IMF is due to decide on the third $3.3 billion tranche in the coming weeks after a visiting mission earlier this month assessed Ukraine's progress and imposed conditions including changes to the banking law.

One of the main changes, according to the text of the bill, strengthens the powers of the temporary administrator placed in ailing banks, who can now make decisions to reorganise the bank together with the central bank and shareholders.

The central bank now has to announce immediately that it has taken a bank into temporary administration and can extend a six-month freeze on deposit withdrawals.

Another amendment makes the procedure for recapitalisation of banks more precise, listing a string of documents and studies that the central bank has to complete and submit to the government if it recommends a capital injection.

The IMF did not say exactly what changes it required to the banking law, only that amendments should "give the necessary instruments and tools for effective programmes to strengthen the banking system".

So far, 17 banks of over 180 have been placed in temporary administration, the largest of which is the country's 10th, Nadra Bank, and the rest relatively small. The government has decided to inject $1.26 billion into the capital of three banks. (Reporting by Sabina Zawadzki; Editing by Ruth Pitchford)

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