Bloomberg News

Russian Ministry Seeks to Curb Bank Loans to Related Parties

March 05, 2010

Russia’s central bank may start monitoring the practice of bank lending to related parties in an effort to reduce the concentration of risk around a small number of bank assets, according to a draft law.

Bank Rossii may be allowed to place a limit on the size or the number of bank loans to affiliated parties, the Finance Ministry said in a document published on its Web site today.

The draft law, which the ministry plans to introduce for government approval, would also allow Bank Rossii to prevent lenders from treating related parties preferentially.

A “concentration of risks” led to a number of Russian banks requiring financial aid from the state, Gennady Melikyan, a first deputy chairman of Bank Rossii, said in December. The state-run Deposit Insurance Agency, which last October was given a legal mandate to support failing lenders, has placed 18 banks under temporary administration and helped them find investors, according to its Web site.

Banks in Russia and other former Soviet countries have become more reliant on single clients, contributing to their low ratings and posing risks to the lending industry, Moody’s Investors Service said in a Dec. 23 report. Concentration levels in CIS banks are likely to increase by the end of this year, according to Moody’s.

To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net.

To contact the editor responsible for this story: Chris Kirkham at ckirkham@bloomberg.net


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