By World Bank
The monetary quarter in Russia has come a ways because the first years of transition. Key to constructing a valid monetary area in a marketplace economic climate is the method of establishing belief one of the marketplace members. 'Building belief' evaluates contemporary advancements in the economic climate in Russia and offers a roadmap for implementation of precedence advancements. The target of this ebook is to help a broader realizing and consensus on precedence reform measures.
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Extra resources for Building Trust: Developing the Russian Financial Sector
Unlike Sberbank, VTB does not fulfill agency or social functions on behalf of the government. This bank is thus well-suited for privatization to a reputable strategic owner. Sale to a reputable foreign bank would provide capital, experience, and reputation in governance, and technical know-how. In preparation for privatization to strategic investors, VTB will need to prepare a strategy regarding its future business plans, thus increasing its value to future prospective owners. Even if full privatization is a few years away, this strategy should be announced soon so as to provide the foundation for an assessment of VTB’s ongoing business decisions.
The reason for this lower growth is that state banks do not generally allocate capital to its most economically efficient use. As lending by state banks tends to be concentrated on the largest (often state-owned) or most influential firms, they do not support more efficient, diversified distribution of credit. In recent years the combination of politicized lending and weak management operating under greater regulatory forbearance —reflecting weaknesses in the oversight exercised by government supervisors of the banks owned by government—have led to cases of spectacular fiscal loss in such countries as diverse as Brazil and France.
Strengthened definition and role of capital adequacy. The focus on preserving bank capital as a readily available cushion to absorb potential losses needs to be strengthened. Measures need to be taken to (a) improve due diligence on the true nature and availability of bank liabilities qualifying as bank capital, (b) strengthen the ability of supervisors to charge equity capital down to the value ascertained as part of on-site bank inspections, and (c) substitute capital insolvency for illiquidity as the criterion for bank bankruptcy.
Building Trust: Developing the Russian Financial Sector by World Bank