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. Last Updated: 07/27/2016

Kasyanov Blasts Central Bank on Reforms

ReutersKasyanov said slow action on banking reform is hurting the nation's economic growth.
Prime Minister Mikhail Kasyanov accused the Central Bank on Friday of proceeding too slowly with banking reform and thus slowing economic growth.

Russia, whose current account shows a strong surplus due to high oil prices, is choking with liquidity as undercapitalized and opaque banks fail to perform their main role of channeling funds into the real sector.

The Central Bank worked out plans for banking sector reform after the 1998 economic crisis, but its main steps have yet to be implemented.

"The Central Bank must urgently take steps to increase banking structures' effectiveness," Kasyanov told the State Duma ahead of the first reading of the 2004 draft budget.

"Higher investment activity compared to last year happened not thanks to but despite the current state of development of financial organizations."

The Duma last week passed a key bill on deposit insurance at its first reading, although deputies and analysts say the remaining two readings will encounter resistance. The law is designed to protect private depositors against loss if their bank goes bankrupt.

The government promised to push the bill through before the Duma is dissolved ahead of December elections, but deputies say conflicting interests will prevent its passage.

"[Russian banks] are yielding more and more ground to foreign competitors on our own market because they cannot satisfy the rising demand for the quality of financial services," Kasyanov said.