Chairman of the State Duma Credit Organizations and Financial Markets Committee Vladislav Reznik
Photo: Dmitry Dukhanin
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Banks Told to Grow or Die
The State Duma Committee on Credit Organizations and Financial Markets yesterday recommended the passage of the first reading of the draft law “On Introducing Changes in the Federal Law On Banks and Banking Activities' and 'On the Central Bank of the Russian Federation,'” which would establish minimum capital for banks. So far, the Central Bank has been determining that amount independently. The Duma members plan to do in the second reading what the Central Bank has been unable to for the last ten years, that is, force all banks to raise their capital to that minimum, which will be ˆ5 million in ruble equivalent. The law repeats the contents of Bank of Russia order No. 1346-U almost word for word. That innovation would threaten 630 banks, that is, more than half the banks in Russia. The Central bank would retain the right to set the minimum capital for banks individually, with the only difference being that that minimum could not be less than ˆ5 million.
The State Duma Committee on Credit Organizations and Financial Markets is already planning amendments to the draft law to be included in its second reading. Under them, banks lacking the mandatory amount of capital by January 1, 2007, would have a transitional period (probably five years) to bring their assets up to the mark. Alexander Murychev, president of the Russia Association of Regional banks, commented that the new law's goals are realistic, but objected that “the state should stimulate the appearance of small banks, not force them off the market administratively.” President of the Moscow International Currency Association Alexey Mamontov also thought the law was realistic, but objected to the arbitrary nature of the law. “In the coming years, new amendments can be passed to raise the minimum amount to ˆ10 million,” he observed. The first time a minimum was set for bank capital was in 1994 by the Central Bank. It was the equivalent of $1 million.
www.kommersant.com
All the Article in Russian as of Dec. 09, 2005
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