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. Last Updated: 07/27/2016

Central Bank Initiates Massive Review of Practices

The Central Bank has cracked down on 14 commercial banks for alleged violations as part of a broader review of the country's burgeoning banking industry, officials said Tuesday.

The Central Bank issued stiff punishments to Management Bank in Volgograd oblast and Eurasia Bank in Izhevsk, which both lost their licenses to conduct foreign currency transactions. Bank spokesmen were unable to comment on the specific reasons for the sanctions.

"In Russia there are over 1, 700 banks", a Central Bank spokesman said. "Not all of them can survive, some are in violation of the law, and we have to weed out the culprits".

While the review is underway, the Central Bank and its branches will not register new banks, Interfax said. Spokesmen could not say how long the review would last.

Central Bank officials said they also discovered legal discrepancies in the charters of nine commercial banks, and ordered them to reregister by Feb. 15 or face closure.

Two other banks had their management removed and Central Bank-appointed managers installed in their place.

The actions are part of a comprehensive review being undertaken by the Central Bank under a resolution adopted last week, according to Interfax. The review follows a decision last month to raise the required authorized capital for commercial banks to 100 million rubles from 5 million rubles.

Under the new resolution, banks whose charter documents do not meet current regulations or that have committed other violations will face sanctions ranging from having their operations partially limited to being shut down entirely.

While bank managers welcome the streamlining of regulations, many said they are still unclear about what is allowed.

Alexander Kryvtsov, vice president of Presnya Bank, indicated that the regulations have not been worked out entirely.

Kryvtsov said Presnya Bank was one of several institutions that had received preliminary approval to hedge against inflation by counting precious metal holdings as part of its authorization capital. The new Central Bank resolution withdrew that approval.

"It was a big surprise for us. We just found out about the decision", Kryvtsov said. "We cannot understand it -- we think what we want to do is legal".