Cbanker: State ownership in Russian banking sector rises to 66.2%

MOSCOW, Feb 26 (PRIME) -- The share of state-controlled banks in the combined assets of the Russian banking system increased to 66.2% after the Banking Sector Consolidation Fund received control over Bank Otkritie Financial Corporation, Promsvyazbank, and B&N Bank, Central Bank Chairwoman Elvira Nabiullina said on Monday.

“The share of state banks in the assets of the banking sector rose to 66.2% from 59.2% as of the beginning of 2017 after the three banks were transferred into ownership of the fund. For instance, the share of state banks on the market in India stands at about 70%, and in Brazil at more than 40%,” she told the Federation Council, the Russian parliament’s upper house.

The mechanism of bailing out troubled banks through the fund led to a higher share of state banks in the industry, but it is not a system-wide change, Nabiullina said.

“The share of the state in our banking sector was already high, this is a historical heritage, a wide-spread habit of people to trust their money into banks with state ownership, and the situation should change with time,” she said. The regulator agrees with the Federal Antimonopoly Service that the share of state banks should contract in the future, she added.

Federation Council Speaker Valentina Matviyenko said that the central bank’s purge of the banking system undermined competition and resulted in domination of large banks, many of which are state-owned. “Nine of Russia’s 10 largest banks are, in fact, state-owned,” she said.

“I am calling on all the participants of the financial market, the financial authorities to watch their tongues, and top management of the Bank of Russia should give them a good example from today.”

She said that the news flow from the banking industry resemble reports from the combat theatre.

“We hear about bankruptcies, license withdrawals, asset stripping endlessly,” she said. “It is clear that all this only decreases trust to the banking system.”

She said that consumers and investors should also receive positive information from the regulator and learn about reliable private banks, which meet all the central bank’s requirements, have good assets and a clear development strategy.

The central bank and financial authorities should closely track the share of private and state-owned banks. One of the reasons of worsening competition is the lack of real interest of banks in fighting for clients and in provision of loans to the producing sector of the economy, she said.

The Federation Council has also sent a letter to Prime Minister Dmitry Medvedev asking for changes in the credit rating and capital of the banks that are allowed to take government funds, Matviyenko said.

“We have sent a letter to Prime Minister Dmitry Anatolyevich Medvedev, in which we stress that the new regulations limit access to these operations for the majority of private banks and they have a negative impact on condition of competition in the sector,” she said.

The new regulations are overly strict. “Corresponding authorities use these criteria when deciding about placing budget funds of the Russian regions and participants of shared-equity construction, as well as when opening accounts for state procurements,” she said.

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