A lack of government strategy toward the banking system has led to the re-emergence of "parasite banks" in Russia and heightened the urgency for reform in the sector, according to Sergei Leontiev, chairman of Moscow's Probiznesbank.
In response, Leontiev's Probiznesbank and nine regional banks all members of the Association of Russian Banks have put forward an open proposal to President-elect Vladimir Putin calling for restructuring of the banking system.
The 10 banks say that the return of "parasite banks" is impeding the creation of a legitimate commercial banking sector in Russia that could be extending loans to the real sector of the Russian economy.
"Since the mid-1990s, we have had a banking system where everyone who could do so tried to funnel budget money through their accounts, engage in currency and financial speculation and extract large commissions," Leontiev said. "So it came as no surprise when it all [the entire banking system] collapsed in 1998."
"But instead of learning from past mistakes and trying to rectify the situation, Russia is instead following the same road that led to the August 1998 financial crisis," he added.
The program put forward by the 10 banks, called "12 steps," incorporates measures the authors believe will ensure an effective and stable Russian banking system.
Although sketchy on details, the program outlines some potential criteria to determine whether a bank is "market commercial" and therefore merits some targeted support. Under the "12 steps" program, this would include investigating the proportion of loans in the bank's assets and the proportion of income from loans to companies in the bank's total income.
The program also includes a number of proposals on tax reform for banks. The authors argue that the government needs to play a more active role in laying down the rules of the game for the banking system in order to ensure fair competition.
Leontiev said that to date, the government has concentrated solely on saving individual banks.
"First, the government rushed in to help system-forming banks just because they were big. That was a waste of time," he said. "A bridge-bank could have been created instead, which would have been in essence the same banks, only free of their liabilities."
"They shouldn't be saving banks, but creating new types of banks," he added.
The government is still yet to respond to the "12 steps" program. But according to The Russia Journal's information, the Agency for Restructuring of Credit Organizations (ARCO) believes the main reason the "12 steps" program was put forward was as a strategy by the banks involved to get closer to the budget funds allocated to ARCO for restructuring.
"All proposals for bank restructuring have the same flaw they are unrealistic," said a high-placed ARCO official who asked not to be named. "Their aim is to get access to attractive business or budget funds allocated to ARCO's charter capital and financing from the 2000 budget."
The program's authors also took a swipe at ARCO, arguing that the agency's policy was illogical because it spent large sums of money saving individual "incompetent" banks while failing to support banks that have demonstrated their professionalism.
But some experts find the entire premise of the "12 steps" flawed.
Sergei Alexashenko, director of the Center for Development and a former deputy chief of the Central Bank of Russia, said the authors were overdramatizing the situation, not because government bodies were doing something they shouldn't be, but because they were doing nothing at all.
"I prefer not to dwell on the words of various statements but to analyze what is actually being done. But in reality, I see nothing," Alexashenko said. "It is all just a case of, on the one hand, wanting to get something from the government, and on the other, offering very correct words devoid of any real substance."
He added the "12 steps" could be summed up as "a call on the state to hand over some money' and to sort out our bad debt problems and so on.'"
"There isn't a single practical step proposed except the law on guaranteeing bank deposits, but its implementation is actually being debated, and that is why it still hasn't been adopted," Alexashenko said. "This ["12 steps"] program is just a bunch of slogans. It looks more like a political declaration to draw more attention their way."
However, the program does have its supporters, such as Pavel Medvedev, chairman of the influential State Duma banking committee.
"If the state creates rules for all, then they will save some banks, but they will first announce on what principles such and such a bank was chosen," Medvedev told radio Echo Moscow. "Of course, the state must also stimulate not just banks but also the economy as a whole, though this could also be called laying out the rules of the game."
Alexashenko argues that proposals for restructuring the Russian banking system need to contain very specific measures many of which, he said, would probably be controversial. But he added that this "tough medicine" would be necessary if the reforms were to be effective.
"For example, you could ban all banks with negative capital. You could restrict licenses for banks with insufficient capital and ban payment of dividends for banks with decreased charter capital," he suggested.
He said that reform boils down to tougher banking supervision in which the Central Bank and Finance Ministry put tougher demands on banks, demands that would in the end see Russian banks become healthier and more independent.
"We always put too much hope in the state: Give money, tell us where to spend it, guarantee our loans,'" he said. "But we must not forget that with rights come responsibilities."