UPDATE 1-Czechs, Nomura agree to drop compensation claims

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PRAGUE, Nov 30 (Reuters) - The Czech Republic signed an agreement with Japan's Nomura Holdings <8604.T> on Thursday to drop mutual compensation claims related to the failure of Czech bank IPB in 2000.

The giant Japanese bank was seeking 40 billion crowns ($1.89 billion) for the state's handling of IPB, co-owned by an affiliate of Nomura. IPB collapsed in 2000, and the government has taken over its bad loans at a cost of several billion dollars.

The government had filed a countersuit against Nomura, demanding up to 120 billion crowns.

Czech Prime Minister Mirek Topolanek, Finance Minister Vlastimil Tlusty and Nomura representatives Sadeq Sayeed and Yugo Ishida signed the deal in Prague on Thursday.

"The threat of payments in the range of billions of crowns has been eliminated and the main arbitration cases are being abandoned," Tlusty told reporters after the signing.

As a part of the settlement, Tlusty will ask President Vaclav Klaus to pardon people investigated in the Czech Republic in connection with the case.

After its collapse, IPB was taken over by the state and sold to bank CSOB, a Czech unit of Belgium's KBC <KBKBt.BR>, for 1 crown in a deal involving state guarantees.

The Czech Republic lost the international arbitration case launched by Nomura in March, and also an appeal against that decision filed with a Swiss court, but no compensation has been awarded in the case.

There has been no ruling on the Czech counter-suit.

Tlusty said he expected CSOB to join the agreement by the end of they year, ending further disputes. ((Reporting by Jan Lopatka, editing by Paul Bolding/Rory Channing; prague.newsroom@reuters.com; Reuters Messaging: jan.lopatka.reuters.com@reuters.net; +420-224 190 474)) ($1=21.21 Czech Crown)

Keywords: CZECH NOMURA/