Ukraine's National Agency on Corruption Prevention (NACP) has temporarily suspended OTP Bank, Hungary's biggest commercial lender, from its list of "international sponsors of war".
The decision was made as a result of OTP's negotiations "to terminate cooperation with the Russian Federation", a condition which must be fulfilled for removal from the list, the NACP said.
The NACP "hopes that this decision will lead to Hungary's unblocking of €500mn of vital EU military aid for the Ukrainian people", the agency added. Budapest has used OTP being on the sponsors of war list as a pretext to block EU aid to Kyiv.
A permanent removal from the blacklist will depend on the bank’s willingness to terminate cooperation with Russia, the agency said.
OTP was put on the blacklist in May, which further increased tensions between Budapest and Kyiv.
NACP said OTP continued to operate in Russia and provided loans to members of the Russian army on "favourable terms", and that it recognised the independence of the Luhansk and Donetsk regions
The Ukrainian central bank had earlier demanded that OTP Group, which has a stake in Ukraine worth approximately $500mn, leave the Russian market.
Hungary’s leading lender has dismissed the accusation that it conducted activities in the occupied territories of Ukraine and said that it operates in full compliance with local and international legislation in all its markets.
In July, Hungary announced that it would maintain its rejection of European financing for the shipment of weapons to Ukraine as long as Kyiv continues to include OTP on the list of sanctioned companies.
The "war sponsors" list was created in the aftermath of Russia’s full-scale invasion of Ukraine in February 2022 in an attempt to deter companies from maintaining their operations in Russia.
"Until OTP is removed from the list, Hungary will not back any further European Union financing of Ukrainian weapons deliveries," Hungary’s foreign ministry said earlier.
Relations between the two countries have been tense for years, with Budapest accusing Kyiv of limiting the rights of the Hungarian minority of 150,000 people living in the neighbouring country, while Ukraine criticises Hungary for supporting Moscow's policies and interests.