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. Last Updated: 07/27/2016

Ignatyev to Take It Slow and Easy

Russia's new Central Bank chief will move quickly on some bank reforms but political worries ahead of key elections are likely to keep the most important ones on the backburner, analysts said Tuesday.

First Deputy Finance Minister Sergei Ignatyev is expected to get parliamentary approval on Wednesday to replace Central Bank chief Viktor Gerashchenko, who quit last week after harsh criticism over snail pace reforms to the battered industry.

But analysts said Ignatyev was unlikely, for the moment, to move much faster on the politically sensitive issue of privatizing Russia's domineering state banks.

"I expect that with Ignatyev's appointment ... something which Gerashchenko thought would take three to five years may happen within two to three years," said Vladimir Tikhomirov, an economist at NIKoil.

"But we are not talking about restructuring the top four to five state-controlled banks. Restructuring them will happen later."

He said the authorities would probably wait until after the next presidential election, due in 2004, before selling off top state bank Sberbank.

Analysts said the Kremlin was wary of incurring public anger if the bank, a key instrument of monetary policy and by far the biggest holder of individual deposits, were to fall into foreign hands.

"Privatising Sberbank is more a political than an economic problem, that is why I think the government will not speed up Sberbank privatization," Tikhomirov said.

The Central Bank has been toying with reforms to the banking system, but analysts said they were still too vague and there had been no real headway on the crucial issue of guarantees for deposits.

The issue has plagued Russia for years but so far the only guarantee system is one run by the government for depositors at Sberbank.

Natalya Orlova, an economist at Alfa Bank, doubted Ignatyev would focus much on the problem.

"But the Central Bank under him is likely to find a compromise with the Cabinet [on the issue]," she added.

Sberbank holds more than 70 percent of the country's individual deposits.

However, UFG chief economist Alexei Zabotkine said commercial banks were beginning to eat into that by luring in private savings by offering a wider range of services than the state bank.

"I have a feeling that people are ready to take risks with large [private] Moscow banks," he added.

"I think it [reform] will go quite slowly. I count on Ignatyev being able to reform the Central Bank, including the system of banking controls. It would be a very large step forward," said Andrei Ivanov, a banking analyst at Troika Dialog.

He said one measure that would help would be to let foreign investors buy bank shares without first having to ask permission of the Central Bank.

That, he said, would give an incentive to banks to offer shares on the market and also be more careful about managing their institutions.