The Ukrainian parliament on July 5 passed an IMF-backed law obligating state-owned lenders to elect a majority of independent members to their supervisory boards, Reuters reported the same day.

The legislation is part of the government's commitment to backers of its $17.5 billion bailout and aims to elevate corporate governance to international standards and help banks withstand political pressure, according to the Ukrainian finance ministry.

Under the new law, six of the nine members of a supervisory board of any state-owned lender will be chosen through an open contest run by a recruitment company with a minimum of 10 years' international experience. The remaining three members will be picked by the country's president, government and parliament, according to the report.

The IMF has been aiding Ukraine's war-torn economy since 2015 but has not given out any funds since 2017 due to slowed reforms. It urged the government to clean up the financial sector, where 60% of state banks' portfolios consist of nonperforming loans due to risky lending practices that lack transparency, according to the news wire.

Ukraine has closed two-thirds of its banks since 2014 as part of the sector clean-up. In 2016, it nationalized the largest bank in the country, PAO KB Privatbank, under the reasoning that 85% of the lender's portfolio was made up of nonperforming loans. The bank's former owners are contesting the nationalization by disputing the claim.

Meanwhile, the market share of state-run lenders increased to 55% since Privatbank was nationalized, Reuters added, citing the Ukrainian central bank.