Russians see no cause for alarm in crackdown on shadowy banking

Sun Nov 24, 2013 7:12am EST
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By Jason Bush

MOSCOW (Reuters) - The problems exposed in Russia's banking system by last week's collapse of mid-sized lender Master Bank are deep-rooted, but in contrast with banking failures of the past there was no evidence this time of other banks' customers taking fright.

Which might seem surprising, as the collapse has highlighted the difficulty of enforcing regulations against banks with strong political connections, and the widespread use of illegal payments to service Russia's large black economy, analysts said.

"Other banks are in the same situation as Master Bank, that's for sure," said Alexander Lebedev, the media tycoon and banker.

"Whether the central bank will have enough guts (to act) - let's wait and see."

The central bank withdrew the license of Master Bank on Wednesday, citing "large-scale dubious operations" and causing payment difficulties for clients and some other banks that used it to process card transactions.

"We don't see any rise in the rates on the interbank market or on the government bond market, so it's a very local event," said Maxim Osadchy, head analyst at BKF bank in Moscow.

The bank ranked as the 72nd largest lender by assets in a country which has more than 900 banks, but most are tiny. Even the size of Master Bank's operations for processing card payments, around $1.5 billion a month, was relatively small, in a sector with assets totaling $1.7 trillion.

"Compared with the size of the banking system it is of course kopecks," Osadchy said.   Continued...

The company logo of Master Bank is seen outside a branch in Moscow November 20, 2013. REUTERS/Maxim Shemetov