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Russian parliament drags feet on key deposit bill

MOSCOW, June 3 (Reuters) - Russia's parliament has decided to postpone the reading of a law on deposit insurance which is seen as a cornerstone of banking reform, Pavel Medvedev, deputy head of the Duma's credit and finance committee, said on Tuesday.

The bill aims to protect private depositors against loss if their bank goes bankrupt. It would erode the de facto monopoly of state-run Sberbank and facilitate the growth of a private banking industry.

It would also allow the central bank, in charge of bringing banks under the deposit insurance umbrella, to weed out poor performers.

"Nobody from the Duma's council was insisting the legislation would be debated during this session," Medvedev told Reuters.

The Council of the Duma, Russia's lower chamber, decides which draft legislation should be included on the parliamentary agenda. Now the bill, which has been in the works for almost a decade, is scheduled for debate in September.

The bill has to pass three readings in parliament.

"Unfortunately it delays the quality control that the central bank wanted to establish and another unfortunate thing is that it shows the influence of vested interests," Christof Ruehl, World Bank's chief economist in Moscow said.

Last month the International Monetary Fund criticised Moscow for the painstakingly slow pace of banking reform.

"The likely reason why the bill has stalled is that Sberbank wants to try protect its position as it has been lobbying very hard to not have its guarantee taken away and also not wanting to pay into the deposit insurance scheme," Al Breach, chief economist at Brunswick UBS said.

Russia has more than 1,200 banks but only Sberbank, the country's largest, enjoys state guarantees for private deposits. That is widely perceived as giving Sberbank an unfair advantage over private banks.

As of the end of February there were 1.4 trillion roubles ($45.69 billion) on deposit in private accounts in Russian banks, with Sberbank holding 70 percent of the money.

Economists said some private banks, which would prefer to avoid the central bank's scrutiny, were also cold-shouldering the bill.

But Breach played down the delay as the best private banks are already winning the trust of many Russians without deposit insurance legislation.

"It is more important to get this stuff right than to get it quickly," Breach said.

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