Prague, March 20 (RFE/RL) -- Alexandr Khandruyev, First
Deputy Chairman of Russia's Central Bank, says that Russia "has N-O
intention to grant centralized loans to insolvent banks."
Speaking yesterday at an international banking conference at Radio
Liberty's Prague headquarters, Khandruyev said the Russian
central bank would only grant loans to "potentially solvent banks."
Khandruyev said Russia "has no remedies for now" to close its many
troubled commercial banks because there is N-O-T effective
legislation regarding the bankruptcy of banks. He said the central
bank is "seeking to try to find appropriate measures in the existing
One such measure is to revoke bank's operating licenses. The
Central Bank recently announced that it revoked the licenses of more
than 300 of Russia's 2,600 commercial banks in 1995. Some analysts
expect another 500 to 700 bank licenses to be revoked in the next few
Clearing out the hundreds of small, undercapitalized banks is a key
element in Russia's efforts to restructure its financial system. To
meet that end, the Central Bank
has said that existing banks must raise their minimum capital to
about 4 million dollars before 1999. Only about 100 banks currently
have net capital above that figure.
The Central Bank is encouraging small banks to merge together into
bigger, stronger institutions. But competition and mutual distrust
between bankers has slowed that process.
Khandruyev blames the problem of proliferating banks on excessively
liberal legislation. He says the avalanche of new institutions has
subsided when the minimum capital required to start a bank has been
raised. He said the central bank two years ago was granting 200 to
300 bank licenses per month. By comparison, this year it is
granting about one a month.
Khandruyev would N-O-T say how many of Russia's banks are on the
verge of collapse or should have their licenses revoked. All of the
licenses revoked last year involved relatively small banks.
But recently the Central Bank announced that it would soon appoint
temporary managers at one of the country's larger commercial banks,
Natsionalnyi Kredit, because of poor management and a shortage of
hard cash. ast summer That bank was ranked 17th (in terms of assets)
out of 2,600 other banks. The announcement sent shockwaves through
the international finance community.
Khandruyev also said that the balance sheets of "many commercial
banks" in Russia "are overloaded with bad debts." That means that
loan officers have lent out too much money to firms or individuals
whcih either can't pay the money back or refuse to do so.
Speaking also at the Prague conference, Lithuanian central bank
Deputy Governor Jonas Niaura says other countries can learn lessons
from the recent banking crisis in his
country, which led to the resignation Prime Minister Adolfas
Slezezicius last month.
Niaura says the Bank of Lithuania has since focused emphasis on
supervision. He says A-L-L banks that do not meet strict new
regulations will have their licenses revoked.
Niaura said: "The new rules of the game are to force transparency"
because without open information about the strength of the banks, the
public will N-O-T have confidence in the banking system. He said the
public also loses confidence in financial institutions when they
suspect political and special interest group pressure influence
government financial policies.