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. Last Updated: 07/27/2016

CB Pledges To Rein in Banks' Risk

SOCHI, Southern Russia -- The Central Bank on Friday said it would tighten control over banks' risk and corporate management and require them to increase capital and improve capital adequacy ratios as part of a comprehensive reform of the banking system.

"Our strategy consists of reviving public trust in the banking system ... and of developing a new quality, which would not allow the situation of a few years ago to be repeated," Central Bank deputy head Tatyana Paramonova told a banking conference.

Banking reform became a priority after the 1998 crisis, when the government defaulted on domestic debt and temporarily froze repayments on non-sovereign foreign debt, triggering a wave of bank failures.

Economists and analysts have often criticized the Central Bank for being slow in implementing banking reform, and Paramonova said the bank was not satisfied with banks' low capitalization and assets' size.

"The banking community should act in the interests of stability so that big but undercapitalized banks do not trigger a repetition of systemic risks," Paramonova said.

The number of active banks has fallen to 1,281 from 1,547 on Aug. 1, 1998, on the eve of the crisis, but Paramonova said the Central Bank could recall more licenses of banks that failed to build up capital.

Paramonova said work on the new banking-reform plan was almost finished and the government would discuss the draft later this month.