Russia should dissuade banks getting big-cbanker

MOSCOW, Nov 2 (Reuters) - Russia must discourage banks from becoming too big, possibly by applying tougher rules on capital and reserves, the central bank’s first deputy chairman Alexei Ulyukayev was quoted as saying on Monday.

Russia has over 1,000 banks, but the top five -- led by state-controlled Sberbank SBER03.MM and VTB VTBR.MM -- account for nearly half of the sector's assets, having seen their share grow during the crisis as people got worried about the possibility of failure of small lenders. "When I say 'too big too fail', it is exclusively in the negative sense. We should de-stimulate banks from trying to become so big," Ulyukayev told Itogi magazine in an interview.

“Possibly for them there should be special rules on capital, on reserves. Tougher than for others. On the one hand that would reduce the stimulus for imprudent expansion, and on the other hand the reserves will be bigger than at other organisations and in case of unpleasantness they would need less state support.”

Ulyukayev added that so far no decisions have been taken on the issue.

He also reiterated that bad loans in Russia’s banking system -- hit by the country’s first recession in a decade and a devaluation of the rouble in late 2008-early 2009 -- would likely reach 10 percent by the end of this year.

“It is of course a significant problem for each separate bank, but not for the banking system as a whole,” he said. (Writing by Toni Vorobyova; Editing by Hans Peters)