Russian Cabinet approves changes to banking law aimed at raising transparency

The Russian Cabinet Thursday gave its backing to draft amendments aimed at increasing transparency in the banking sector by raising the requirement for central bank permission when buying stakes in Russian banks, news reports said.

Photo: Russian Cabinet approves changes to banking law aimed at raising transparency

Under the changes, which will be submitted to Russia's lower house of parliament for approval, market participants must notify the Central Bank if they plan to buy 1 percent or more of a bank's shares, and must receive its permission if they buy more than 10 percent.

Previously those thresholds had been 5 percent and 20 percent respectively. Finance Minister Alexei Kudrin told Thursday's cabinet meeting that the requirements were in line with international banking standards.

"Supervisory bodies must be in a position to assess the structure of a bank's capital," Kudrin was quoted by the RIA-Novosti agency as saying.

Russia is working to clean up its banking system at times a violent process.

Last week deputy Central Banker Andrei Kozlov was shot point-blank in the head by two assailants in a killing widely believed to be connected to his campaign against money-laundering and criminality in the sector.

Kudrin noted that foreign interest in the banking system was growing, however, and indirectly credited Kozlov. "It is understood that our financial system is comparatively clean and promising," ITAR-Tass quoted him as saying. "The fight against money laundering has played a particular role here."

Separately, Kudrin said that Russia would insist on the right to cap foreign participation in banks' charter capital as part of its drawn-out negotiations to join the World Trade Organization. Kudrin said that foreigners should control no more than 50 percent when asked by Prime Minister Mikhail Fradkov what the ideal balance in the sector should be, reports AP.

But Kudrin said there were no plans to establish a limit, and Central Bank Chairman Sergei Ignatyev said the issue wasn't pressing since foreigners' share, while increasing, was "low by any criteria."

"In the next three to five years limitations should not be imposed," he said.