By World Bank
The monetary quarter in Russia has come far because the first years of transition. Key to constructing a legitimate monetary zone in a marketplace financial system is the method of establishing belief one of the marketplace members. 'Building belief' evaluates fresh advancements in the economy in Russia and gives a roadmap for implementation of precedence advancements. The target of this e-book is to help a broader figuring out and consensus on precedence reform measures.
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Extra info for Building Trust: Developing the Russian Financial Sector
The continued presence of these entities as “banks” stifles the process of building trust in the Russian financial system. The CBR’s difficulties in supervising such a large number of banks would be aggravated if the authorities introduce even a minimal general deposit insurance scheme. Such insurance would augment the ability of the many small, inadequately monitored banks to attract deposits from the public, which would create potentially sizeable fiscal liabilities. Thus an important step toward improving trust in the banking system—and an important precondition for introducing deposit insurance—would be to take decisive action to expedite consolidation of the banking system by replacing full banking licenses with limited ones for institutions that do not actively solicit deposits from the public.
Sale to a reputable foreign bank would provide capital, experience, and reputation in governance, and technical know-how. In preparation for privatization to strategic investors, VTB will need to prepare a strategy regarding its future business plans, thus increasing its value to future prospective owners. Even if full privatization is a few years away, this strategy should be announced soon so as to provide the foundation for an assessment of VTB’s ongoing business decisions. It is, for example, far from clear that VTB’s acquisition of international banks formerly owned by CBR, or its plans to expand its domestic branch network, would enhance the bank’s value in privatization.
Also, existing regulatory criteria do not allow for a sufficiently broad evaluation of the bank’s financial health or the overall viability of a bank’s rehabilitation plan. Consequently, banks that should realistically qualify for liquidation are considered “rehabilitated” and remain open. As a result, and by the time such banks fail, their assets are more than likely depleted to the point where they are unable to satisfy the claims of their depositors. Bank restructuring framework. Two entities in Russia are currently responsible for bank restructuring.
Building Trust: Developing the Russian Financial Sector by World Bank