UPDATE: Cbank to finish Russian banking sector purge in 2-3 years

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MOSCOW, Mar 28 (PRIME) -- Russia’s central bank plans to finish the banking sector purge from unfair players in two to three years, Chairwoman Elvira Nabiullina said on Tuesday during a conference of the Association of Russian Banks.

“I would like to stress that we definitely plan to finish the cleaning process in a few coming years. Our own estimation shows the term of two to three years,” she said.

She added that by that moment the fatal loss of stability by banks and revocations of licenses will have become extraordinary events.

The regulator’s goal is to remove unfair players from the banking system to improve competition as the bank revokes licenses only when it sees that actions of management and owners do not correspond with interests of depositors and creditors and that the bank will not be able to become stable again, she said.

Through the ongoing reform of banking oversight, the authority plans to switch to a counseling form of monitoring and offer banks measures to improve their condition at an early stage of their problems, she said.

Russia’s banks have no system-wide risks. It has a safety cushion and a chance to increase crediting of companies. “The combined capital adequacy ratio of the banking sector is at a comfortable level of more than 13%, while the minimum figure is 8%. Our estimates show the current capital stock at 1.8 trillion rubles, it is sufficient to increase provision of loans,” she said.

Previously, the regulator introduced a bill to the State Duma, the parliament’s lower house, seeking introduction of a so-called three-level banking system, which splits banks into categories depending on their licenses. Small banks will receive a basic license and fall under simplified regulation procedures. Nabiullina said that the regulator has had many discussions of the system and thinks that it will not worsen competition conditions for banks.

Finance Minister Anton Siluanov said that the government is worried by the conditions of the banking system after the budget lost about 100 billion rubles in troubled banks last year. The government will consider national ratings of commercial banks before working with them, he said.

The ministry also supports the regulator’s idea on the three-level banking system. “It will allow us to ease the administrative burden on banks, increase affordability of banking services on the one hand. And on the other hand, it will become the basis for stability of the banking system and improve its health,” he said.

(57.0233 rubles – U.S. $1)

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