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. Last Updated: 07/27/2016

Duma Rejects Veto On Central Bank Bill

The State Duma on Thursday voted almost unanimously to reject a veto from the Federation Council on amendments to the Central Bank law.

The Federation Council gave the bill the thumbs-down two weeks ago, and a 20-member conciliatory commission formed by the two houses of parliament could not resolve all of the issues. The law would curtail the Central Bank's power to inspect commercial banks.

"The Federal Council refuses to compromise," said Mikhail Zadornov, deputy head of the Duma budget committee, news agencies reported. "We only have one option left -- to override the Federation Council veto."

With a tally of 389 to 1, with one absentee, the Duma vote easily exceeded the necessary two-thirds majority.

The Duma conceded one point to the Federation Council: The Central Bank will be able to carry out multiple inspections of commercial banks on a specific issue within one accounting period.

The original bill introduced a limit of one inspection per issue per year, which flies in the face of international banking supervision standards like the Basel Accords.

"Limiting the Central Bank in its capability to examine banks is against the general principles of sound banking supervision," said Andrei Kozlov, first deputy chairman of the Central Bank.

"We know problems exist [with repetitive inspections], especially in the regions. The best way to improve the situation is not to limit the Central Bank's possibilities, but to instill the best actions and practices [in the Central Bank]," he said.

The Duma instructed the conciliatory commission to draft a separate bill that would allow the Central Bank to carry out multiple checks. Zadornov said he expected the bill to be submitted this fall, Prime-Tass reported.

Finance Minister Alexei Kudrin said before the compromise that President Vladimir Putin is likely to veto any bill that limits the Central Bank to one inspection per year.

The main contention left is the composition of the National Banking Council, a body to oversee the Central Bank.

The Federation Council demanded that the banking council include 15 members, rather than the bill's proposed 12, with more representatives for itself and the Central Bank.

The number of members on the council is irrelevant for the Central Bank to function properly, said Richard Hainsworth, analyst at Renaissance Capital "There seems to be some political motivation behind it," he said. "It may just be a proxy for another battle between the Federation Council and the Duma."

The Federation Council also wanted the right to order an Audit Chamber check into the Central Bank's activities. According to the bill, only the Duma has that right.

The bill now goes to the president to be signed into law. If the Putin refuses, his veto can be overridden by a two-third vote of both the Duma and the Federation Council.