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Central Bank to Purge Laundering and Unstable Banks from the System

14.10.2013 12:27 / Interfax

The Central Bank of Russia plans to purge the banking system from banks performing questionable transactions and financially unstable players, said Head of the Bank of Russia Elvira Nabiullina in a Russia 24 TV interview.

“We see two types of banks that are under our close scrutiny at the moment. Banks that perform so-called questionable transactions – transfers abroad, cashing sums related to non-paid taxes. We are purging the banking system from banks that breach the law, performing questionable transactions”, said Nabiullina.

The other type of banks that the regulator is paying close attention to is financially unstable players, “attracting savings from private individuals and companies and investing the money in risky projects”.

“We offer the owners of these banks a chance to rectify the situation, we work together on financial recovery plans, we give them 6 months to one year for bad cases”, said Head of the Bank of Russia.

According to her, if the owner duly addresses the issue, “the bank returns to the path of normal development”, however, if problem bank owners fail to cooperate, the Central Bank will “first ban banks from certain market operations, then take them off the market”.

The head of regulator stressed that banks must take a responsible approach to project finance, since they employ external investments, partly raised from private individuals.

“For instance, I sometimes hear at meetings with banks that there is a bad loan, badly serviced, and yet agricultural companies, investment projects, major infrastructure projects are lent money. The logic is clear – banks credit the real economy. However, they must remember that they credit these projects by raising money from the people. Banks should not bear excessive risks”, she pointed out.

Nabiullina refused to say how many problem banks there are, stating that “there are not too many of these banks, and the financial state of the banking system gives no grounds for concern”.

“Some banks live with a problem for a number of years. We are taking care of these problem banks. I think that it is in everybody’s best interests to purge the banking system from problem banks that pose a threat to consumer rights, depositor’s rights”, said Head of the Bank of Russia.

The Bank of Russia have already voiced their intention to actively counteract banks with questionable transactions and financial instability. Bank licenses have been revoked more frequently in recent months.

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