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. Last Updated: 07/27/2016

Central Bank is Seen Emerging Unscathed

The Central Bank will remain the sole regulator of the banking sector despite a heated State Duma campaign to strip it of its power to revoke licenses, a senior official said Wednesday.

In February, the Central Bank came under fire from Duma deputies, who accused it of putting banks out of business without sufficient cause. An official working group was then set up to consider whether to strip the Central Bank of all regulatory powers.

"This is no longer being seriously considered," said Anatoly Aksakov, deputy head of the Duma Committee on Credit Organizations and Financial Markets and president of the Association of Regional Banks.

Delegates from both of Aksakov's organizations are taking part in the working group, along with officials from the Finance Ministry and the Central Bank. The group will present its official proposal by the end of the year, Aksakov said. "It is still possible that the rights of regulation will be given to another agency, but it is very unlikely," Aksakov said in an interview.

In a separate development, the Supreme Court on Tuesday set a precedent by upholding the Central Bank's decision to deny deposit insurance to the Russian Bank of Business Cooperation in September 2004.

The small commercial bank, also known as RBDS, won three appeals in lower courts against the decision before the Central Bank took the case to the Supreme Court.

RBDS has no further means of recourse, meaning that it will remain among the roughly 10 percent of domestic banks that do not have the right to take deposits. Telephone calls to RBDS went unanswered Wednesday.

"Now all of its deposits will be annulled and all existing depositors will take back their money," said Viktoria Belazyorova, banking analyst at RusRating, an independent bank-rating agency.

The bank still holds a license and can perform all other banking functions, however.

"Above all, it is the bank's reputation that will suffer," Belazyorova said.

But the Central Bank's standing looks to be cleared after months on the defensive. Small banks began attacking the Central Bank during the anti-money laundering crusade led by its former deputy head, Andrei Kozlov, who set up the deposit insurance system and was murdered in an apparent contract hit in September.

Accusations of corruption at the Central Bank spread from the lending sector's rank and file to the Duma in February, when Vladislav Reznik, the head of Aksakov's committee, berated the bank for its perceived misconduct. Central Bank Chairman Sergei Ignatyev and Kozlov's replacement, Gennady Melikyan, also attended the speech, during which Reznik called for the creation of a new regulatory body.

"All this noise has gotten a lot quieter," Aksakov said.