(Reuters) - Nicaragua's legislature is set to vote on a bill overhauling the Central American nation's banking system, which would give the state control over appointing the leadership at private financial institutions in the country.

WHY IT'S IMPORTANT

The bill, sent by President Daniel Ortega to Congress, was presented to lawmakers on Monday. The proposal would give the national banking regulator the ability to name banking executives at private firms.

The regulator could also dissolve or liquidate banks by decree, the bill's text reads.

ADDITIONAL CONTEXT

The proposal would represent the latest tightening of state control over the sector. Last month, the Ortega-allied legislature passed a bill forcing banks to ignore sanctions against Nicaraguans locally.

Dozens of Ortega administration officials, including his wife and vice president, Rosario Murillo, and several of their children, have been sanctioned abroad for alleged human rights violations during the repression of anti-government protests in 2018.

KEY QUOTE

"This totally distorts the market's functioning," economist Marco Aurelio Pena told local news outlet 100 Noticias. "One thing is to regulate and supervise (banks), and another is to actually administrate (them)."

WHAT'S NEXT

The proposal is expected to easily pass Nicaragua's unicameral legislature. It will become law once it is published in the national gazette.