Chairwoman: Cbank to prevent rise of state share in banking sector

MOSCOW, Sep 8 (PRIME) -- The central bank is determined to prevent further growth of the state’s share in Russia’s banking industry, Chairwoman Elvira Nabiullina said at the Moscow Finance Forum on Friday.

She also said that the central bank will not close its eyes to the problems appearing in major banks due to unwise expansion policies or risk management mistakes, and plans to solve the problems even in the biggest banks using the Banking Sector Consolidation Fund, a newly created bailout vehicle.

“As to global financial market problems and financial market reforms, we have paid much attention to systemically important credit organizations. The problem exists in Russia as well,” the official said.

“Now we are raising capital and liquidity requirements to systemically important companies, although they do not like it. We are strengthening supervision… We will pay more attention not only to assessment of financial results… but to risk management quality. ”

Nabiullina also said that the central bank will not necessarily sell troubled Otkritie Financial Corporation (FC) Bank to a strategic investor have a bail-out have been over, but may offer it to the open market.

“(The new bailout mechanism) is aimed at rapid solution of a bank’s problems through direct capital injections and development of a transparent for investors and profit-making business model to offer the bank to the market,” she said.

“We will not necessarily offer the bank to a large strategic investor. We want to make it transparent enough to turn it into a public company. This is very important for us.”

The chairwoman also called for learning from the 2008 financial crisis’ mistakes to prevent excessive deregulation and market overheating.

“We need to remember lessons of the previous crisis although it happened 10 years ago. The crisis resulted from excessive deregulation with regulators paying no attention to risks,” she said.

“The second thing the crisis demonstrated was a rising globalism of the financial markets… That is why we need to maintain a coordinated approach… The third and the most important thing is financial stability. It is important to decide before financial stability risks appear, at an upward stage of the economic growth cycle.”

Now the world is close to a new economic growth stage, Nabiullina believes, and regulators need to be sensitive and make timely decisions to prevent overheating.

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