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Moscow Times
September 20, 2001
Bank Reform Sparks War of Words
By Alla Startseva
Staff Writer

A roundtable on banking reform Wednesday showed that the government has got
its work cut out.

What was supposed to be a friendly discussion between leading bankers
erupted into a heated free-for-all, with participants struggling to get a
word in edgewise.

On the agenda were two rival banking reform proposals: one from the Central
Bank and the other the Mamut plan from the Union of Industrialists and

From first appearances, the talks Wednesday got off on the right foot.

"Many people are here, despite the fact that the meeting was organized on
very short notice," said organizer Alexander Nekipelov, director of the
Institute of International Economic and Political Studies, as he opened the

"Since the Central Bank published on Monday its strategy for developing the
banking system, there is a need to discuss it together with other market
players," he said, adding that he regretted no Central Bank officials could

The microphone was first turned over to MDM-Bank head Alexander Mamut, who
together with Alfa Bank CEO Pyotr Aven leads the Union of Industrialists
and Entrepreneurs, or RSPP.

Mamut immediately slammed the Central Bank plan.

Reforms "must have a direct effect, with specific measures and terms, and
with someone who is responsible for them," he said.

"All that, the Central Bank's plan lacks."

The Central Bank's program calls for little change to the dominant role
played by state-owned banks in the country's banking system. It envisions
the state retaining its stakes in banks that are considered strategically
important. State stakes are controlled by the Central Bank.

The plan also sees a reduction in corporate income tax for banks -- from 43
percent to 24 percent -- and new regulations to protect creditors from

While the Central Bank rules out any restructuring of state-owned Sberbank
in the reform, the Mamut plan insists a reduction in the profit-making
banking activities of state-owned banks.

Mamut demanded that the Central Bank's proposal include measures from his
own plan.

"We think that the future is in private banks," agreed Aven.

Then the discussion began heating up.

Aven asserted that the more than 1,000 financial institutions that call
themselves banks are "doing nothing more than cash transactions that are
often money laundering."

Former Deputy Central Bank Chairman Alexander Khandruyev, clearly unable to
keep silent any longer, declared, "Small banks for small transactions,
large banks for large."

"I am getting angry," retorted Mamut.

"It is not an axiom that an increase in a bank's capital also increases its
stability and security," said Khandruyev.

Bigger is not necessarily better, chimed in Garegin Tosunyan, vice
president of the Association of Russian Banks.

"An excessive concentration of capital will create a bigger problem -- a
monopolization of the sector that will lead to a structural crisis,"
Tosunyan said.

Deputy Sberbank chairman Gennady Melikyan, after trying repeatedly to
interrupt the discussion, finally got his 2 cents' worth.

"The RSPP has incorrect proposals that reflect an obvious lack of knowledge
about the operations of state-owned banks," he said.

"Sberbank cannot be reformed -- they've missed the boat," rebutted
Melikyan, prompting a storm of laughter and indignation.

Participants argued for another hour or so before being swept away in their
chauffeured luxury cars.

The two reform plans are to be tabled at a government meeting Sept. 27.
Prime Minister Mikhail Kasyanov, who is to head the meeting, is seeking to
piece together legislation to create a healthy banking sector.

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