Financial Markets: Increasing Complexity, Maintaining Stability

3–5 July 2019, ST. PETERSBURG

    FAS Proposes to Ban State-owned Banks from Acquiring Financial Institutions

    The Federal Antimonopoly Service (FAS) proposes to ban state-owned banks from acquiring credit institutions in order to prevent their share from increasing, said Andrey Kashevarov, Deputy Head of the authority, at the International Financial Congress.

    “We proposed to ban the state-owned banks from further acquisition. It takes the next step: to implement all this, and to decide how it is possible to administer those bans that will not cause harm, but do good,” Kashevarov said.

    According to him, the government's share in the banking sector is estimated at 64–66%. “Governmentalization of the banking system and growth of the government's share in certain markets — that share is estimated at about 64-66% more or less, depending on the market,” the Head of the FAS said.

    Kashevarov also pointed out that 30 regulatory acts were implemented in 2016, which ensured comfortable existence of state-owned banks, providing them with access to cheap equity. In his opinion, it is necessary to stop providing access to government resources, focusing on capital size. “If we refuse to consider equity capital the criterion for access to government resources, let's rely on the rating,” concluded Kashevarov.

    “Banning acquisition has a very specific logic related to halting the deterioration of competitive environment. The decree of the President, signed on 12 December, last year, virtually declares the trend to reduce the government's share, to stop governmentalization. We will insist on this (on implementing the prohibition – Ed.). This item was included in the draft road map and supported by the Bank of Russia,” Kashevarov said, answering the question from

    As for the planned acquisition of Vozrozhdenie Bank by VTB Bank, it will be considered in the existing legal terrain. “Consideration of the specific deal will go within the legal regulation, which exists at the moment. The legal terrain in this case is the estimation of concentration in the market and the decision along the standard rules,” Kashevarov said.

    Some experts believe that the government share in the Russian economy is now at 70%. The Academic Supervisor at the Higher School of Economics, Professor Evgeny Yasin believes that it is around 50%. “According to our calculations, over the past ten years the government share increased from 39% to 47%, and that is a whole lot,” the expert said. In his view, the government share in the Russian economy should be reduced to 20–25%. That is a good indicator for Russia, which would help increase the activity of the public and create incentives for economic development, the professor believes.

    Maxim Oreshkin, Minister of Economic Development of the Russian Federation, agrees with that the government share in the Russian economy is approaching 50%. He talked about this in April, in his speech at the State Council for the Development of Competition. Oreshkin mentioned that President Vladimir Putin in his address to the Federal Assembly had set the task of bringing the share of small and medium-sized businesses in the GDP to 40%. “Obviously, without significant reduction of the government’s presence that share would be impossible to achieve,” he said.