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. Last Updated: 07/27/2016

Central Bank Says Bankruptcy Legislation Needed

Top management of Russia's Central Bank on Wednesday defended its record in restructuring the country's troubled banking sector, including the recent decision to close down Russia's largest regional bank, Tveruniversalbank, but said a lack of proper legislation and resources has seriously complicated its task of reorganizing the industry.


Central Bank officials said the decision to revoke the license of Tveruniversalbank in July had "sobered up" the bank, which is now seeking to relaunch its activities.


"We gave Tveruniversalbank a chance," said Sergei Panov, head of the Central Bank's department for the reorganization of banks.


"Recalling a license and the liquidation of a lending organization are not the same," he said.


Central Bank Chairman Sergei Dubinin said he would neither seek the closure of a large number of banks nor support major bailouts in the form of nationalization of commercial banks.


"I wouldn't like to make wide use of these mechanisms," Dubinin said of the closure of Tveruniversalbank and the recent government decision to nationalize Agroprombank.


Dubinin rejected the notion of an imminent banking crisis, but acknowledged that the current structure of the banking system "does not accord with the demands of a market economy."


According to Central Bank figures, approximately 500 of Russia's 2,100 banks incurred losses last year.


Analysts believe up to two-thirds of the country's banks may be forced to close down during the next several years.


Dubinin said holes in Russian legislation make it virtually impossible for regulators to enforce bankruptcies in the sector.


"After a license is withdrawn, the rights and possibilities of the Central Bank are very limited," he said.


"The fundamental cornerstone is missing: a bankruptcy law," Central Bank deputy chairman Konstantin Lubenchenko said of Russian banking legislation.


Dubinin also revealed Wednesday that the Central Bank had to sell $1.6 billion from its reserves last month to keep the ruble from falling too fast because of unexpectedly high demand for the dollar. "We'd like to keep the ruble rate against the dollar moving in line with the growth of prices," he said.


A shortage of qualified personnel has been another factor impeding the Central Bank's activities, said first deputy chairman Alexander Khandruyev.


"The bank is understaffed," he said. "It has not enough personnel to staff temporary managements."