Reform of state-owned banks

Key reform areas

Implementation of fundamental changes in the corporate management of state-owned banks which shall make them independent from political and administrative influence.

We consider it necessary to ensure the operation of the supervisory boards of state-owned banks in accordance with the recommendations of the OECD and the Basel

Banking Supervision Committee based on the below principles:
- appointment of independent executives to the supervisory boards (at least 2/3 of the total number of members);
- set-up of specialized committees at supervisory boards (in charge for audit, risk management, personnel policy and remuneration);
- market mechanisms for remuneration (remuneration for the members of state banks’ supervisory boards must be close to the similar positions in the private sector).

To reach the highest possible effectiveness of state-owned banks, relevant priorities for their business activities and operational processes must be set.

To reach objectives set by the state for its banks, their business model must be significantly amended and new management mechanisms must be implemented.

The further development of state-owned banks shall be focused on two key areas:

- maximal focus on the targeted customers’ groups, full package of financial services contributing to the maximal possible profit;

- reform of the operational models.

What has been done so far?

The “Principles of the Strategic Reform of the State-Owned Banks” have been elaborated.

A working group has been founded to ensure the effective implementation of measures stipulated in the Strategy. The working group includes representatives of the Ministry of Finance and international financial organizations (World Bank, IMF, EBRD, IFC).

What’s the advantage?

- the reform will improve the principles and mechanisms of corporate management;
- the reform will help improve the competitiveness and effectiveness of state-owned banks;
- the reform will contribute to making state-owned banks profitable. Thus, state budget expenses for the annual recapitalization of the banks will be saved; instead, a new source of revenues for the state budget will be created.

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