The Bank of Russia is ready to start using a new mechanism for the rehabilitation of the banking sector from both a legal and an organizational standpoint, Central Bank Governor Elvira Nabiullina said at the International Financial Congress in St. Petersburg, TASS reports. Nabiullina said the Central Bank hopes that as “the market is cleaned up and problems at banks are detected earlier”, there will be more cases “when it would be advisable to try to restore a bank’s solvency and not revoke its license”. After work is completed to improve the banking system, the oversight performed by the Bank of Russia will focus on matters concerning development and stimulation, she added.
Nabiullina said tightening regulation has made it possible to improve the health of the Russian financial system.
“We largely got rid of banks whose business was built on illegal transactions as well as numerous chronically unstable banks”, she said. To accomplish this, the regulator had to wean bankers off tools that they had used to conceal the actual state of affairs at their banks and withdrew assets, such as the creation of fictitious assets through lending to technical borrowers, securities that were held at unreliable depositories abroad, and the withdrawal of funds through lending to non-residents.Nabiullina said the Central Bank’s priority is now to restrict the lending of bank owners. “The top problem is lending to owners’ businesses. The H25 standard, which restricts financing for the projects of owners, was introduced this year, but it is still being applied in preferential conditions”, she said.