13.02.09

The State Duma and the Federation Council are seeking total control over operations carried out as part of anti-crisis programs by the Central Bank of Russia, the Deposit Insurance Agency, the Development Bank, and some other state corporations. The government will send detailed quarterly reports to the State Duma, naming the bailed-out banks and specifying the amount and terms of financial support.

The scale of the government’s efforts to support the national financial market amid the continuing crisis made a strong impression on both chambers of parliament. Now, lawmakers aspire for control over the distribution of the government’s allocations among market traders. With this in mind, State Duma deputies drafted a bill obliging the government to report on the implementation of measures to support financial and labor markets and other industries. The Duma’s financial committee could recommend the document for first reading tomorrow. The proposed bill would help enhance the transparency of anti-crisis efforts, an explanatory note says.

With things as they are, the distribution mechanism for the government’s anti-crisis allocations remains unclear to not only market traders but also lawmakers, Liana Pepelyayeva, a member of the State Duma’s financial market committee, told RBC Daily. “One of the bill’s main goals is to restore confidence in the Central Bank and state corporations responsible for the distribution of these funds, so people will not wonder what happened to the trillions of rubles provided by the government, and why they failed to produce the expected effect,” she explained.

Lawmakers want to know everything about the distribution of the bailout funds, including the names of recipient banks and other institutions, the precise amount and terms of allocations to each recipient, and which of them were also granted tax deferrals. They also want to know how much of the government’s money was deposited with banks, when, and for what terms, as well as the results of the consideration of banks’ applications for deposit contracts, complete with the list of credit organizations, including the amount of deposits and the interest rates.

The results of the Central Bank’s unsecured auctions won’t escape lawmakers’ scrutiny, either. Meanwhile, the Central Bank is in no hurry to disclose the details of the auctions. A source with the Central Bank told RBC Daily that Audit Chamber Chairman Sergei Stepashin sent a formal letter to Central Bank Chairman Sergei Ignatyev in December 2008, requesting information about banks that took part in unsecured auctions, including the amounts provided to them. “The Central Bank, however, refused to collaborate, saying it was not obliged to disclose such details under the Russian law in force. If deputies want to obtain this information, they will have to amend the law on the Central Bank first,” the source explained. The Central Bank reported yesterday that from now on banks would have to inform it monthly about the amounts lent to the priority sectors of the Russian economy.

Lawmakers’ curiosity goes even further to inquire what banks received the Central Bank’s allocations as compensation for losses resulting from transactions with banks that had their licenses revoked, and on what terms.

The Development Bank, the Deposit Insurance Agency, the Fund for the Promotion of the Housing and Utilities Sector Reform and the Agency for Housing Mortgage Lending will also be required to inform the inquisitive lawmakers about their
anti-crisis efforts. Accordingly, the Development Bank will be asked to provide the list of legal entities, the amounts and terms of foreign currency-denominated loans to repay the foreign loans borrowed before September 25, 2008, as well as the list and size of claims acquired from foreign lenders regarding obligations that arose before September 25, 2008.

“State Duma deputies keep asking what happened to the government’s anti-crisis cash injections and why they have not reached regional banks and corporations. This law’s passing will answer all such questions,” Duma deputy Anatoly Aksakov told RBC Daily. He also thinks that the government’s report must be open to the public, given taxpayers’ natural interest in the use of their money.

Lawmakers are ready for action, according to Liana Pepelyayeva: “If we detect violations by those responsible for the distribution or use of the funds, we have various options, including sending deputy or parliamentary requests to the Prosecutor General’s Office.”

The Prosecutor General’s Office reported yesterday that the heads of the seventy commercial banks that received government support had been formally warned that from now on their banks will be monitored by the interdepartmental working group on the prevention of economic crimes.

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Source: Analytical department of RIA RosBusinessConsulting