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. Last Updated: 07/27/2016

CB Official: Go Slow on Reforms

A Central Bank official said in an interview published Wednesday that any reforms of the banking system would be a gradual process.

Russia's banking sector has long been seen as needing reform to promote long-term growth after the 1998 financial crisis brought many banks to their knees. The government is due to discuss reforms later this month.

Western advisers say Russian banks still do not fulfill the role they do in developed economies by providing a means for money to flow through the system by intermediation in borrowing and lending.

Deputy Central Bank head Georgy Luntovsky told the Vremya MN newspaper that a plan for the banking system that extends over five years had been drawn up by the Central Bank and government.

It sets out what steps are needed to restructure the system, including the introduction of deposit guarantees and new bankruptcy rules. Foreign advisers have also said international accounting standards should be applied to Russian banks, but Luntovsky said this could not be done quickly.

"A few hotheads are saying we should not wait for 2004, but introduce international accounting standards already today, but in fact many commercial banks would experience serious difficulties, especially with capital," he said.

The dominant position of state-controlled Sberbank, which holds almost 80 percent of household deposits due to widespread distrust of private banks, has also been criticized as distorting competition.

But Luntovsky saw no need for the state to retreat from its positions in key state-controlled banks if the market was open and fair.