Central Bank wants to clean banking sector from unviable credit institutions

Russian public companies will disclose principles and approaches that apply in the issuance of bonuses to top managers and members of the Board of Directors in their annual reports, Interfax reports citing the Central Bank of Russia. In addition, annual reports must show key performance indicators of public companies, on which these bonuses depend. Right now the law does not demand to provide a detailed information on how the amount of bonuses for companies' management changes. Proposed changes are aimed at increasing the level of financial market transparency and improving the quality of corporate management. It will give investors the opportunity to assess the effectiveness of the company's management and the extent to which bonuses system can help the company to achieve strong financial results. 

Speaking about the situation in the financial market, a researcher at the Center for Study of Structural Studies of the Institute of Applied Economic Researches of RANEPA, Mikhail Khromov, recalled the previous crisis: "The main problem of the crisis in 2008-2009 in terms of the monetary authorities, lied in the fact that this issue was not resolved. At the time, we managed to overcome the crisis due to the fact that regulation was softened, regulation was softened, banks were allowed to not specify existing problems in terms of loans and assets fully or specify them only to a certain extent. When the economy started to improve, and it happened quite quickly, the growth of nominal rates started and regulations returned to the previous level. The problem was kinda sorted out thanks to the fact that the loan portfolio and bank assets started to grow, and, accordingly, the number of bad loans started to decrease. But in reality, the amount of debts as well as the number of overdue debts that existed by mid-2010, for example, did not decrease. In other words, the problem was resolved due to the fact that the banking sector started to grow, actively develop, make new profits." 

Now the Central Bank wants to clean banking sector from unviable credit institutions. According to the expert, "the main problem is who will pay for an expensive restructuring process. The Deposit Insurance Agency has almost no money, it lives using loans given by the Central Bank, so it is basiccaly a disguised emission. The question is whether the existing mechanism of restructuring able to resolve this problem systematically. Now mostly small banks are losing their licenses. As soon as there will be a problem with banks from the top hundred it will become an important event. In addition there is a number of large banks, such as 'Uralsib' and 'Trust', which are going through financial recovery procedure. Their licenses were not revoked and they undergo processes on resolving some problems, including problems with bad debts. Let's see how it will end."