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. Last Updated: 07/27/2016

12% of Banks Lost Licenses Last Year

Some 12 percent of Russia's commercial banks lost their licenses last year and more than 80 percent of those examined by the Central Bank had broken the law, Central Bank Chairman Sergei Dubinin said Wednesday.


Dubinin told a news conference that the Central Bank had revoked the licenses of 315 banks -- 12 percent of the total -- in 1995 and the fate of another 96 institutions was in the balance.


The Central Bank had also restricted operations at 423 banks and introduced temporary management at five.


"There were serious violations in the work of more than 80 percent of the banks we inspected," Dubinin said.


Violations of banking laws included extending free or low-interest loans to a bank's founder, he added, but did not say how many banks had been examined by the authorities.


The measures followed the liquidity crisis that shook Russia's banking worlddlast August, when most Moscow banks found themselves unable to meet obligations on the interbank market.


The crisis undermined banks' trust and crippled the domestic credit market, which has not yet fully recovered. Several banks have faced financial problems.


Russia has some 2,500 commercial banks, but only a few meet Western standards of capital and credit policy. Many are tiny operations.


Dubinin said the Central Bank had prepared new rules, to come into force from March 1, determining how banks should be run and funded.


The Central Bank planned a special program to identify troubled banks and either help them to recover or work out how to close them down, he said.


The program includes Lombard credits to help refinance commercial banks, while the Central Bank was also planning a system of stabilization loans, Dubinin said.


Separately, Prime Minister Viktor Chernomyrdin called on the Central Bank to increase its supervision of commercial banks and asked parliament to speed up approval of bankruptcy laws.


"We welcome all Central Bank actions in this direction," Chernomyrdin told Central Bank regional branch heads.


Chernomyrdin said procedures to declare banks bankrupt should be speeded up and asked the State Duma, the lower house of parliament, to pass laws more quickly.


Dubinin told the news conference that Russian monthly money supply for 1995 rose about 6.6 percent on average, compared to 7 percent in the first six months of the year.


Growth was below the average monthly rise in prices for the year, Dubinin said, but he did not name the figure.





Russian monthly inflation was 17.8 percent in January 1995, and slowed through the year, ending at 3.2 percent in December.


Dubinin said monthly growth of the monetary base last year was 5.6 percent.