Kudrin lashes at Russian banks’ work during crisis, urges tighter supervision

Russian banks failed to work well during the recent financial crisis and need tighter banking supervision, Russian Finance Minister Alexei Kudrin said at a banking forum on Wednesday.

“All the banks worked unsatisfactorily during the crisis. Perhaps, this was related to insufficiently tight prudential supervision, their failure to work with risks and also to the low professional level of the banks’ staff,” Kudrin said.

“During the crisis, all the banks had a poor structure of assets and risks assumed, and also had loans extended outside qualitative lending procedures,” he said, adding that he meant not only small and medium banks but also large lending institutions.

Kudrin also said the government would accept a new strategy of the banking sector development until 2015 at its meeting on Thursday.

The strategy sets strict requirements for the banking system, the level of banking services, the banks’ transparency and sustainability, the finance minister said.

The strategy requires banks to raise their minimum capital to 300 million rubles ($10.5 million) from 2015. Under effective law, minimum capital requirements for Russian banks are increased to 90 million rubles from 2010 and to 180 million rubles from 2012.

Russia, which receives a large part of its revenue from oil exports, was hit hard by the global financial crisis, prompting the government to take urgent measures to save the banking sector from collapse, extending direct and subordinated loans to major banks, most of them held in private hands.

Currently, 185 Russian banks do not comply with the 180 million ruble minimum capital requirement while 372 banks have their capital below the 300 million ruble mark, he said.

Russia’s new banking strategy expects domestic banks to raise the value of their assets to match the country’s GDP by 2015 compared with 75.4% of GDP in 2010.

Kudrin also said he was against the idea of canceling or cutting profit tax for banks.

“We believe that there are absolutely normal market mechanisms for banks to increase their capital and, therefore, there is no need to cancel or cut profit tax in the banking system,” he said during the banking forum.

The idea to cancel or cut profit tax for banks was put forward at the forum by Dmitry Ananyev, chairman of the financial markets and money circulation committee at the Federation Council, Russia’s upper chamber of parliament, and a co-owner of Promsvyazbank, one of Russia’s largest privately held banks.


MOSCOW, March 16 (RIA Novosti) 

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