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. Last Updated: 07/27/2016

WTO Negotiator Says Banking Is a Very 'Painful' Topic at Talks

Bankers, analysts and bureaucrats are split over the impact Russia's accession to the World Trade Organization would have on their still-developing banking industry.

"Banking and access to the banking services sector are some of the most painful topics of our discussion," said Yekaterina Mayorova, a member of the government WTO negotiating team seconded from the Economic Development and Trade Ministry.

Last month the Central Bank said it had removed a restriction on foreign participation in the banking system, in what was widely seen as a move to ease WTO accession talks and a sign that the government is committed to liberalizing financial markets. The limit on participation of foreign capital had been 12 percent of total charter capital.

Mayorova said this week that this has not altered the government's condition that in the future, further limits may be set if and when they are needed.

The government has been seeking to ensure that it retains the right to introduce limitations on the foreign presence in the banking sector. But WTO members continue to insist that Russia completely open its banking services market to foreign players.

"Our position in the negotiations remains to maintain the possibility to introduce quantitative limitations in future if the necessity arises," Mayorova said.

Concern centers on the effects of foreign banks flooding the domestic market, destabilizing the industry and leading to what Sberbank head Andrei Kazmin has described as a "green light to legal export of capital from Russia."

The director of Standard & Poor's ratings agency's financial group, Irina Penkina, said the impact of WTO accession is unlikely to be dramatic.

"We have already seen foreign banks entering the Russian market and the scope of their activities is still developing," she said. "But even though we see foreign-owned banks among the top 30 Russian banks, their share by equity is still below what is allowed by Central Bank requirements."