The bank inspection department of the National Bank of Ukraine (NBU) on April 20 will commence diagnostic exercises for the 10 largest Ukrainian banks as foreseen in the Extended Fund Facility (EFF) program of the International Monetary Fund (IMF) for Ukraine.

A banking source has told Interfax-Ukraine that the decision is stipulated in NBU resolution No 260 of April 15 on diagnostic exercises for banks.

According to the resolution, the department will inspect the leading banks.

The NBU also said that the stress tests for the 10 subsequent banks will start from June 1, 2015.

As reported, last year leading audit companies conducted stress tests for the 15 largest and 20 large banks of Ukraine under an NBU order as part of the Stand-By Arrangement of the IMF for Ukraine. After the stress tests, nine of 15 largest banks were to be capitalized by UAH 56 billion and large banks – UAH 10 billion. Later on, some of the banks were declared insolvent.

The Memorandum of Economic and Financial Policies (MEFP) agreed by the Ukrainian government with the International Monetary Fund (IMF) states that diagnostic exercises for the top 10 banks should be carried out by late July.

"By end-July 2015 and end-September 2015 on the basis of end-2014 and end-March 2015 data, respectively, we will update the diagnostic exercises for all operating banks among the top 10 and 10 subsequent banks, respectively, to identify additional losses associated with the conflict in the east and the downgraded economic outlook through 2017," reads the document posted on the IMF's website.

If after these diagnostic exercises it will be established that the N2 requirement is lower than 10%, banks will be obliged to present capitalization plans within one month to reach N2 5% as of late January 2016, 7% - by late December 2017 and 10% - by late 2018.

If some banks are insolvent, the banks are to be brought back to solvency by late August and late October 2015 – for the top 10 and 10 subsequent banks respectively.

The EFF program permits the allocation of UAH 139 billion to capitalize banks and finance the Individuals' Deposit Guarantee Fund in 2015 via the issue of state bonds, and the NBU could buy bonds worth UAH 55 billion this year.