GOVERNMENT HOLDS RUSSIA'S BIGGEST BANKS TO KEEP INVESTORS OFF, WARNS CENTRAL BANK BOSS

LONDON, FEBRUARY 27 (RIA Novosti correspondent Alexander Smotrov) - Russia's biggest banks are staying in government hands to badly hamper overseas capital investment in the Russian banking, warned Oleg Vyugin, first deputy president of the Central Bank of Russia. He was addressing a London conference on, "Entrepreneurial Ethics and Corporate Management in Russia: Facts and Investors' Opinions." Russia intends to privatize its Sberbank (Savings Bank) and Vneshtorgbank, head foreign trade bank, within a few years to put an end to their privileges. Not the government but a deposit insurance agency will guarantee their liabilities to clients.

Active since last month, the agency accumulates money to compensate ruined bank depositors, and comes out as corporate liquidator of such banks. Such are its principal duties, said Mr. Vyugin.

As he came over to Central Bank objectives for this year and the next, the speaker mentioned inspection of banks authorized for mortgage transactions, and a switch to international accounting standards, as of January 1, 2006.

The banker summed up last year to highlight its rapid banking progress, which exceeded average economic growth rates several-fold. Banking revenues now account for 42 per cent of the gross domestic product.

The USA's Citibank, the Societe Generale of France and certain other major Western banks are determined to appear in the Russian consumer banking sector after many Russian-based commercial banks dynamically penetrated it. Oleg Vyugin is enthusiastic about the prospects. "All that done, Russian banking will change beyond recognition within a few years," he said.