You're reading: Ukraine designates Rodovid as ‘bad asset bank’

Ukraine will move bad assets from three nationalised banks into one of them, Rodovid, to revive others, the Finance Ministry said on Friday, a move towards making good on its commitments under an IMF bailout.

Ukraine has pledged to sort out problems in the banking sector under the $15 billion programme that it agreed with the International Monetary Fund last July.

The Fund has delayed the next $1.6 billion disbursement under the programme after Ukraine missed a deadline on implementing a pension reform and sought to soften a planned energy price hike for consumers.

The government took over relatively large local lenders Rodovid, Ukrgazbank and Bank Kyiv after they became insolvent in 2009 and has since invested $2.1 billion in them. However, none of the three lenders has fully recovered yet.

"It is being proposed to turn Rodovid into a ‘bad asset bank’ where all bad assets from Ukrgasbank and Bank Kyiv will be moved and which will take over bad loan recovery," the ministry said in a written response to Reuters’ questions.

"The ‘bad asset bank’ will have a limited banking license: it will not draw new deposits and extend new loans."

The banking system in the former Soviet republic was hit hard by the global financial crisis, which caused an economy dominated by steel exports to shrink by 15 percent in 2009.

The central bank said this week it would transfer retail deposits from Rodovid into state-run Oschadbank.

The Finance Ministry said the government planned to inject 4.3 billion hryvnias (about $540 million) into Ukrgazbank to "stabilise" it. It would hire an adviser to decide the fate of Bank Kyiv, the ministry said.