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WTO membership poses no direct threats to Russia’s financial sector

May 31, 2012, 18:12 UTC+3

"In the first place it will be a challenge to the domestic industry and agriculture," - the president of the Association of Regional Banks of Russia Anatoly Aksakov said

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MOSCOW, May 31 (Itar-Tass) —— Russia’s accession to the World Trade Organization is not posing any direct threats to the country’s financial sector. In the first place it will be a challenge to the domestic industry and agriculture, the president of the Association of Regional Banks of Russia, deputy chairman of the State Duma’s financial markets committee, Anatoly Aksakov, has said.

He believes at the same time that to enable Russian banks to retain competitiveness their resource base should be built up and legal conditions of their operation improved.

Aksakov said Russian banks practically lack the opportunity to draw long-term resources: most of the retail bank deposits can be withdrawn on demand, borrowing on the financial market is difficult, and the Bank of Russia carries out refinancing for a period of no more than a year. In Russia there are very high legal risks, involving the collection of overdue debts and the collateralization of loans, and also the organization of syndicates and project financing.

He said most borrowers coming to Russian banks were domestic organizations, which would encounter harsh competition with the foreign providers of import products. As a result, there will be possible a considerable reduction of the client base of Russian lending organizations and, as a result, their greater instability.

For the purpose of supporting the domestic producer it is necessary to conduct a soft and flexible exchange rate policy, Aksakov said. Besides, it will be feasible to raise the capitalization of the Russian Bank of Support for Small and Medium Businesses, in the first place in the spheres of material production and development of innovations.

Aksakov also suggests introducing tax incentives to long-term investment in domestic production, and also to lower the tax on the profit of legal entities to 15 percent on the condition profit is spent on the development of production in the material sphere of the economy or on raising the capitalization of financial institutions.

The Aksakov-led financial market section, created within the working group for legislative support for Russia’s accession to the World Trade Organization, has drafted a number of other proposals called for maintaining the competitiveness of Russian financial institutions.

In particular, for strengthening the resource base it is proposed to empower the Central Bank to issue loans to banks against a collateral for a period of three years, to permit the opening of deposits irrevocable ahead of time, and to simplify the procedures of confiscating the collateral in case of borrower’s default on liabilities.

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