The Central Bank is now both regulator and owner of Otkritie, Promsvyazbank, and BIN, Gazeta writes.
In addition, the Bank of Russia [that is, the CBR, -ed] became the owner of the largest Russian insurance company – Rosgosstrakh ([which was] part of Otkritie).
In 2017, for the first time in Russia’s post-Soviet history (in the USSR, of course, all the banks were state-owned and, in fact, simply redistributed State money), a paradoxical situation arose: the Bank of Russia, whose functions include regulating the banking market, was also its largest direct participant.
This is, Gazeta continues,
…as if the referee of a football match was simultaneously the head coach and captain of one of the competing teams. And the strongest. If you consider that the Central Bank is also the main shareholder of Sberbank, soon it will be necessary to raise the question of the meaning of the existence of commercial banks in the country as such.
If you combine the total assets of only three flagship banks that were reorganized and [are now] owned by the Central Bank – Otkritie, BIN, and Promsvyazbank (all these banks bailed out other lending institutions) – at the time of the introduction of the interim administration, they would have amounted to approximately 4.8 trillion rubles.
This would make the “Central Bank Group” the fourth-largest bank by assets, Gazeta writes. The first three are: Sberbank (state-owned), VTB (state-owned), and Gazprombank (state-owned).
The CBR has promised to sell these banks “to private investors” as soon as possible. But it seems “unlikely that they will find buyers in the foreseeable future” if current trends continue.
“This raises serious questions about the Bank of Russia itself.” What exactly is it doing? Gazeta asks. What is its role, if it’s not capable of regulating the banking sector?
The situation of the banks seems very precarious.
The Central Bank itself understands that the massive withdrawal of licenses has not yet made the Russian banking system fundamentally more reliable and honest. It is no coincidence that they have joined with the Ministry of Finance to prepare a bill that changes the amount of penalties for banks that violate the law, Kommersant writes.
The CBR has decided to tie the amount of fines for banks that do not comply with the law and do not comply with the regulator’s instructions, to the value of their own capital. The upper limit of the fine is not established.
What will happen in the coming year?
2018 will be decisive for the future of the Russian banking sector. Will it remain diverse with the presence of banks of different sizes, regional lending institutions, a notable private sector or will there gradually become one or more “super banks” under total state control? Many Russians still recall the early 90s, when suddenly even the seemingly unshakable and eternal structure of Sberbank collapsed, and millions of people lost their savings immediately.
The Bank of Russia has been able to cope with keeping the ruble exchange rate stable and relatively predictable, Gazeta concedes. But now it has to prove that it can effectively regulate the banking sector.
P.S. Nobody really seems to have addressed Alfa’s role in all of this, except for this piece I put up last year. But they are the largest private bank in the country, and to some degree responsible for the fact that the CBR took over three of their rivals. And as I discussed with Promsvyazbank, the evidence suggests that Alfa had a hand in bankrupting it.