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. Last Updated: 07/27/2016

Sketchy Group Formed to Save Banks

The Central Bank on Tuesday launched an impressive-sounding new organization to rescue Russia's banking industry, but the lack of any details on the institution's funding or structure fueled suspicions that the new body would achieve little.

Following the first meeting of the Interdepartmental Coordination Committee for the Development of Banking in Russia, or MKK for short, the Central Bank released a statement saying that the organization was "created with the goal of successfully conducting the restructuring of the banking system and increasing the effectiveness of efforts taken to develop domestic banking."

MKK, whose creation was announced only Monday, will include representatives from leading international lenders to Russia, primarily the International Monetary Fund, the World Bank, the European Bank for Reconstruction and Development, and the U.S. Agency for International Development, according to the Central Bank.

None of those Western organizations was available to comment Tuesday.

Russian members of the committee will include representatives from the State Duma, the Federation Council, the presidential administration, the Finance Ministry, the Justice Ministry, and others. Central Bank deputy head Tatyana Paramonova heads the committee.

A Central Bank spokesperson declined to give additional information about MKK other than to say that its initial meeting will continue through Wednesday.

However, Paramanova told Tuesday's issue of Segodnya that MKK will focus more on the banking system in general - oversight, legislative recommendations, infrastructure development - than on rescuing specific banks.

She also raised the possibility that some of MKK's member organizations could even be prepared to fund part of the committee's efforts.

The sudden appearance of a new state-sponsored committee with foreign representation, as well as a burst of activity around that committee, have sparked a significant deal of interest. Observers are inclined to believe that MKK and its all-star lineup of investors are actually window dressing on the eve of Prime Minister Yevgeny Primakov's visit to Washington next week.

"The government wants to create an impression that it is doing something," commented Kim Iskyan, banking analyst at MFK Renaissance in Moscow.

Russia desperately needs Primakov to succeed in winning a quick IMF infusion of about $4.5 billion - which would be sent right back to the IMF in just two months, when Russia is due to pay back $4.5 billion borrowed in previous years.

All told, the state owes the IMF and other foreign creditors a staggering $17.5 billion this year. Those debts come due as Russia has a rapidly dwindling $11.5 billion in the Central Bank this month and is predicting 1999 budget expenditures of just $25 billion.

But the IMF wants to see progress in numerous areas before it relieves Russia from its fiscal agonies. Reforming Russia's moribund banking industry is high on the Fund's wish list.

Setting up a sector-wide committee with major foreign representation, including the IMF itself, would go far to score points with the international lender.

But whether the MKK will ever achieve any practical results is another matter, analysts said.

Iskyan, while admitting the "meeting of minds" was a positive step, wondered if MKK could make a difference.

"If they make recommendations [for reform in the industry], who will listen? Will the recommendations be implemented? I don't think so."

Others were even more skeptical.

"Look at the number of organizations involved. They all have different interests, different mind-sets," said one analyst, who declined to be identified.

The government late last year set up an organization for reviving Russia's banks, the Agency for Restructuring Credit Organizations, or ARKO, but it has failed to achieve anything concrete.