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. Last Updated: 07/27/2016

WTO Tells Russia to Let in Foreign Banks

Russia could lift restrictions on foreign bank operations on the domestic market to ease the country’s entry into the World Trade Organization, First Deputy Finance Minister Alexei Ulyukayev said Tuesday.

Ulyukayev said the liberalization of insurance and banking sectors was a key issue in talks with the WTO.

"It is possible … that in the course of these negotiations we can end restrictions on foreign banks’ entry onto the Russian market. This could be a serious concession on our part," Ulyukayev said at a banking conference.

The WTO insists that Russia must throw open its banking sector for foreign capital. Russia promised last month that it would make new offers on opening its vast market for goods and services in February.

Vladislav Metnev, a banking analyst at Aton brokerage, said, however, that in practice the 12 percent legal limit on foreign bank capital on the Russian market was no longer strictly observed by Central Bank.

"The limit on the presence of foreign banks in Russia is not this restriction, it is the prospects for the Russian market," Metnev said, adding that the retail sector was already crowded and the number of creditworthy businesses was small.

Matthias Varing, chief coordinator for the Dresdner Bank group in Russia, said in a Tuesday interview with the Vedomosti daily that registration of foreign banks in Russia had become a "normal process."

But Varing said their entry would not become a "decisive" factor on the Russian market.

"I don’t exclude that in the coming years, other foreign banks will appear here, for example from Spain and Italy," Varing said. "This is normal economic development, but I don’t think it will be decisive for the development of Russian banks."

Ulyukayev said the Russian government was taking an inventory of the banks in which it held stakes. It is considering its exit from those banks where it holds less than 25 percent and reviewing its ownership in banks where it owns a larger stake.

"We will review the issue of the banks where our stake is more," he added.

The Central Bank has said the government has financial interests in more than 400 banks.

Ulyukayev said state-owned banks should serve private retail clients because Russia lacked a law enshrining state guarantees for private deposits, as well as state foreign trade operations and exporters.

He said state-controlled banks should also help finance investment projects that were unattractive to commercial banks.

"Everything else is reserved for commercial banks," Ulyukayev said.