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. Last Updated: 07/27/2016

Bank Fund Set to Back Liabilities

The Central Bank will set up a fund to insure the liabilities of Russian banks in an attempt to bolster confidence in the nation's nascent financial industry, a top Central Bank official announced Tuesday.

"We have nearly finished setting up the Federal Fund for Bank Liability Insurance," the Central Bank deputy chairman Alexander Khandruyev told a news conference. He would not say, however, how soon the fund might be in place, citing "unresolved questions."

The announcement comes as Russia's banking industry is facing a surge in non-performing loans that some economists say could bankrupt as many as half of the country's 2,200 commercial banks.

The industry has also been hit by the closure of large investment houses, such as Tibet and the Russian House of Selenga, which were operating as banks but did not have banking licenses.

"Such companies not only hit market reforms, but discredit the concept of the market itself," Khandruyev said.

A week ago the Central Bank published a list of 24 companies that were accepting deposits without a banking license. Khandruyev said the Central Bank had a list of about 20 more companies to be published soon.

Central Bank officials offered few details of how the new insurance system would work, saying that the plan was not yet finalized.

Mikhail Pomazkov, deputy head of the bank supervision department, said that the Central Bank had studied various deposit insurance systems in Eastern Europe and the United States to develop the Russian fund. He said that the fund would focus on preserving the health of the industry as a whole, as opposed to the U.S. Federal Deposit Insurance Corporation, which insures individual deposits.

Most of the money for the fund would come from commercial banks themselves, Pomazkov said, while the Central Bank would seek to keep its contribution to a minimum.