Russian bankers seek extension on deposit insurance exemptions

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The Russian Association of Regional Banks has proposed an extension until mid-2011 for a temporary regulation permitting banks to offer services as members of the deposit insurance system without complying with certain obligatory financial requirements.

The Russian Association of Regional Banks has proposed an extension until mid-2011 for a temporary regulation permitting banks to offer services as members of the deposit insurance system without complying with certain obligatory financial requirements, according to the association's proposals published on Monday.

The temporary suspension of article 44 of the federal law on deposit insurance, which requires banks that are members of the deposit insurance system to comply with certain capitalization ratios to stay financially viable, was introduced by Russia's financial authorities in October last year to help banking institutions stay afloat amidst the financial crisis in Russia.

The moratorium allowed about a hundred banks, including some major players in the banking market, to stay within the deposit insurance system, which currently covers 914 banks. The Bank of Russia has not yet determined its position on the moratorium extension while the Deposit Insurance Agency believes that the current lenient regime allowing their operation within the system must be scrapped.

"In the current conditions of dramatic falls in loan interest rates, a declining interest rate margin and fees along with reduced demand for loans, a high share of overdue and prolonged liabilities, long periods of debt recovery, yields on bank operations, the rate of return on assets and capital are swinging to negative territory. From the viewpoint of the previously effective law, these indicators make it possible to recognize such credit institutions as financially unstable and exclude them from the deposit insurance system," Anatoly Aksakov, head of the association and State Duma deputy, said in a statement to the central bank.

 

MOSCOW, September 20 (RIA Novosti)

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