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The future of Russian banking

With a new presidential term for Vladimir Putin and crucial administrative reforms underway, Ben Aris considers the future shape of Russia’s over-banked financial system.
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President Vladimir Putin was inaugurated for a second term on May 7, a term that will see reforms shift from laying the foundations for growth to implementing the new rules. If reforms continue, by the time elections come around again in 2008 Russia could boast a consolidated banking sector dominated by two state-owned banks and a handful of strong commercial banks in a second tier.

After nearly a decade of inactivity, banking reforms began again last year with the passage of a deposit insurance scheme in November, due to go into effect next year. The scheme will go someway to breaking state-owned Sberbank’s stranglehold over the retail business, but its real significance is its role as cornerstone for a raft of administrative reforms that could transform the banking system.

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