Former KGB officers really don’t like any aspect of the country’s affairs to be outside their control, be it an election, the media, civil society, or even the internet or racy cartoons. This is however especially true with the economy, as we’ve seen illustrated by a spate of nationalizations, price controls, repeated shutdowns of market trading, and a suggestion from Putin to invest the stabilization fund into domestic securities. Let’s just say that they don’t really get along with this whole free market thing. Case in point, the siloviki are getting tired of having too many banks, and appear to be ordering a quick consolidation. These deals are going to have some winners and a lot of losers, which could further erode the pact between the Kremlin and the oligarchs. The Wall Street Journal reports:
The central bank declined to comment for this article, but a person close to the government confirmed the existence of the initiative. “The idea is not that the government will do this by force but that the current financial crisis is a good opportunity to let this happen in an evolutionary way,” the person said.
The central bank last week briefed senior bankers on developments in the sector, with Chairman Sergei Ignatyev saying 50 to 70 banks could fall by January alone, according to a person familiar with the talks.”They’ve been giving a clear message that they want to use this opportunity to reduce the number of banks significantly,” that person said.”They’ll protect anybody whose loss would shake stability and confidence, but they won’t bail out many small banks,” he added.In addition, Deputy Prime Minister Igor Shuvalov told a select group of foreign investors earlier this month that the number of banks would fall drastically — perhaps to fewer than 100 — as the consolidation unfolds over the next two years, according to a summary of the meeting circulated by the Moscow-based investment bank that arranged it.