(Adds comment of Ukraine’s central bank) LONDON, May 14 (Reuters) - The Bank of England said on Friday that it had approved the “bail-in” of $595 million of loans that a British-based financial company made to the major Ukrainian lender PrivatBank before it was nationalised in 2016. The bank’s nationalisation has been subject to lengthy litigation in Ukraine, and the International Monetary Fund last year made successful resolution of the legal issues a condition for financial aid. The loans to PrivatBank had been made by UK SPV Credit Finance plc, which the BoE said did not perform banking activities or have banking customers in Britain and instead had acted as a funding conduit for PrivatBank. Under international rules, Ukraine’s central bank, the National Bank of Ukraine, had to ask the BoE for recognition of the bail-in of the loans, which were made under English law. “The Bank of England’s recognition gives effect to the bail-in of the four loans in question as a matter of English law,” the BoE said. Under a bail-in, unsecured creditors have their loans written off or converted into shares of the struggling bank according to terms set by regulators where the bank operates. “Whilst considering its decision, the Bank of England has kept relevant stakeholders, including the NBU and representatives of creditors, informed about the recognition process throughout,” the BoE added. Ukraine’s central bank welcomed the decision. It said that the nationalisation of PrivatBank had been carried out within the framework of a reliable legal procedure that fully complied with the legislation of Ukraine and international standards. “In the months ahead, my team and I will continue to work for greater accountability and transparency in Ukraine’s financial services sector,” the central bank governor Kyrylo Shevchenko said in a statement. Ukraine’s central bank declared PrivatBank insolvent in 2016 and wrote off the assets of its owners and related firms to cover the lender’s capital gap. It said PrivatBank was nationalised because shady lending practices had pushed it toward insolvency. The Kyiv government invested over $5.7 billion to rescue the savings of about 20 million small depositors. Former shareholders deny any wrongdoing and have fought in different courts since 2016 to reverse the nationalisation. The government’s handling of the fall-out from the nationalisation is seen as a litmus test for President Volodymyr Zelenskiy’s anti-corruption reform agenda and willingness to tackle deep-rooted vested interests. (Reporting by David Milliken Additional reporting by Natalia Zinets in Kyiv Editing by Hugh Lawson and Frances Kerry) Our Standards: The Thomson Reuters Trust Principles.