Ukraine seeks to shore up banking sector

The National Bank said it has prohibited early withdrawals of bank deposits with maturity dates and has imposed limits on lending money, after worried depositors withdrew more than $1.3 billion from their accounts since the beginning of the month.

It also imposed limits on trading of foreign currency, with no more than a 5-percent difference between buying and selling prices allowed, in order to shore up the battered hryvna, which has fallen nearly 20 percent in recent weeks.

"The psychological factor is what is 90 percent responsible for creating panic," deputy chairman of the National Bank Anatoliy Shapovalov was quoted saying by the Unian news agency. "This decision was made so that people calm down and banks work in a normal manner."

Analysts welcomed the move, but also said it demonstrated the banking sector was in bad shape.

"This measure is aimed at stopping panic among depositors," said Yevehn Hrebenyuk, a stock market analyst with Troika Dialogue Ukraine.

The Ukrainian economy, already shaken by the world financial crisis, was battered further last week when President Viktor Yushchenko dissolved parliament and called for an early vote for Dec. 7 in his battle for power with Prime Minister Yulia Tymoshenko.

The vote would be the third parliamentary election in as many years, and experts say it will only exacerbate the country's economic and political problems.

Stocks have plummeted some 30 percent over the past month as investors fled emerging markets amid the world financial crisis. Many steel mills--the backbone of the country's fragile economy--have had to halt or slow production because of a lack of global demand.

The National Bank has had to come to the rescue of two major banks to avert a crisis. That prompted many Ukrainians to withdraw as much as 6.2 billion hryvna ($1.3 billion) from their accounts, or 2.7 percent of all bank deposits that have a maturity date, according to Unian.