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Central Bank puts financial sector in order, no banking crisis on agenda

December 17, 2013, 17:18 UTC+3 Zamyatina Tamara
© ITAR-TASS/Sergei Bobylev

MOSCOW, December 17. /ITAR-TASS/. Since early August the Central Bank of Russia (CBR) has revoked the licences of 25 banks, among them major players in the top hundred in the financial market - Investbank, Smolensky Bank and Master Bank. People are now doubting the reliability of their deposits. Black lists of 136 potentially problem banks are circulating in social networks. Officials and financial experts say no banking crisis is in question, but do not deny the population is increasingly distrustful towards lending institutions.

The head of the CBR, Elvira Nabiullina, has officially dismissed rumors of a black list of banks whose licences the CBR is reportedly going to revoke, describing it as was another tabloid hoax. The information is allegedly derived from reliable sources, but the CBR disclaimed any connection to the speculations.

The head of the Association of Regional Banks, State Duma (lower house) deputy Anatoly Aksakov, told online he saw the notorious black list of potential bankrupts. He blamed it on rival banks that had lost their licences and on ill-wishers who included in the ‘exit list’ some quite reliable credit organizations that were to blame for dissemination.

Aksakov also denied hearsay of a banking crisis and described the current situation as consolidation of Russia’s banking system, while licences have been revoked from those unscrupulous market players which violated CBR regulations and breached the law. Therefore, Aksakov believes, it is no wonder 25 banks of the total of 950 banks forfeited licences: “About two dozen banks leave the financial market daily, as many as in the US. This is a natural process.”

Even so, the situation has caused turbulence and a crisis of trust in banks, and banks came to face obstacles in receiving funds in the inter-bank market, the expert said.

“The Central Bank should have prepared a strategy to restore order in the financial sector for a longer term ahead,” the director of Vnesheconombank’s Strategic Analysis and Development Department, Vladimir Andrianov believes. In an interview to Itar-Tass the financier said “it is unreasonable of the Central Bank to launch a massive campaign”.

“If the CBR had closed a bank once in two months, it would not have provoked such an acute reaction. But when licences are revoked from five banks in a row, it can hardly be perceived as normal by the people,” the expert believes.

“Such an approach could have caused a massive negative and irrelevant reaction. People would go to banks to withdraw money, which could force a number of small and medium banks to close,” Andrianov said.

According to the expert, “the CBR may be implementing former finance minister Aleksey Kudrin’s old-time plan to reduce the number of banks in Russia and terminate the activities of banks illegally cashing and bringing assets abroad”. Andrianov believes “illegal capital flow abroad makes up 80 percent of the total amount of assets withdrawn to foreign countries - the share of shadow business in Russia is quite high”.

The chairman of Vneshtorgbank’s supervising council Sergey Dubinin does not think the decision to revoke licences from 25 banks is the indication of a banking crisis. In an interview to Itar-Tass the former head of the CBR said the overwhelming majority of Russian banks complied with world standards, and steps taken to recuperate financial system were “pinpoint measures”.

Dubinin admitted that “sores” had piled up in a number of financial market segments, like forging financial statements, and “this abscess was to be opened”. “Of course, the financial market's temperature has risen, which usually leads to convalescence,” he said.

The financier denounced a number of small banks for dishonesty: “After Master Bank had been closed, some banks for fear of repeating the ‘elder brother’s fate' ceased servicing customers and refused to give deposits back. Hence they faced the CBR’s punishment.”

“Panic among depositors will soon calm down, as it did not engulf a large amount of banks’ customers,” Dubinin believes.

The president of the Association of Russian banks, Garegin Tosunian, takes a similar view. In an interview to Itar-Tass he said: “Depositors will calm down when they understand that revoking licences is not a campaign but a necessary clear-up of the financial sector.”

“In this situation the Central Bank has no goal other than ceasing some dubious operations. Curing the financial sector is not an easy task, but the course of treatment needs to be started at the proper time. Surely, some players and depositors are struggling through a painful period now. But the pain will abate, and most will see this was a necessary measure,” Tosunyan said.


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