Hubert Pandza, board chairman of Deutsche Bank Moscow.

‘Reform of the banking sector is moving very slowly. There is a lot of discussion about it today, but almost no real results. Everyone knows that the reason lies in the failure of the government, the State Duma and the presidential administration to come to a consensus on what needs to be done and how to do it.

In my view, we first have to put a full stop in the story of the 1998 financial crisis. We have not yet done this. I am still waiting for the Russian authorities to give an official explanation as to what happened, why it happened and the consequences. Despite the fact that losses amounted to billions of dollars and many banks had their licenses revoked, no criminal charges have been made to this day.

Everything must be transparent, but it seems that Russia has no desire to get seriously onto this. This is strange and it has a negative effect on foreign investors, especially in the banking sector.

As for the future, I think it is time to end discussion on restructuring and get on with passing the laws we've been talking about for over a year now. Priority here should go to three laws from the so-called IMF package [amendments to the law on the Central Bank, on banks and banking activities and on bankruptcy of credit organizations]. It is time to stop these endless discussions, which have gone so far as to be absurd.

There is also the problem of confidence. For eight years now there has been talk of guaranteeing deposits, and this is also absurd. There is a need for a system of guarantees, at least for some transition period. There is no other way to get people to trust banks and deposit their savings in them. Of course, there has to be the same kind of competition in the banking sector as in other sectors of the economy. A bank is a bank, and the fact that its capital may come from state or foreign structures should not be a reason to give it preferential treatment, impose restrictions upon it or use it as a lever with which to put pressure on a client.

We are a small bank with a narrow specialization, and therefore we do not feel the impact of the unequal conditions on the market referred to by the roundtable participants. If Sberbank is doing well, it is good for me too, because I can turn to Sberbank as a partner through the interbank market and use the resources it has collected from the population. Fair competition is essential in a normal situation, but Russia doesn't have a normal situation today. This is why it is important that a minimum of one or two banks are providing guarantees for people's savings. Imagine that there were no Sberbank. Where would the average depositor go then?"

Alexander Shokhin, chairman of the State Duma Committee on Credit Organizations and Financial Markets.

‘The main priority of banking reform is to prevent a systemic banking crisis. We must ensure protection of savings and create conditions for making long-term loans. Lack of a deposit guarantee system is the main brake on developing competition in the private deposits market. Sberbank's monopoly must be broken, but not by destroying Sberbank itself but rather, by creating normal conditions for commercial banks. We would need only two months to create a limited guarantee system and have it come into force from next year. The scheme would be simple: In return for improved reliability and transparency, banks would get guarantees for deposits. This can be done through steps such as introducing international accounting and financial reporting standards.

Sberbank, for its part, must become a universal bank. If it isn't privatized, even after introduction of a deposit guarantee system, it will probably have to work on the mortgage and consumer-loan market.

State banks are an obstacle to developing competition. We have to push through the law introduced by State Duma deputies that would restrict the state's participation in credit organizations. We propose keeping three state banks – an export-import bank, an investment development bank and a bank to work with infrastructure projects.

Bankruptcy is an intrinsic part of banking-sector restructuring. We haven't yet been able to reach an agreement with the government, Central Bank and Presidential Legal Department on taking the capital adequacy ratio as a criterion for bankruptcy. Bankruptcy is a legal procedure, and a mathematical approach to it contradicts both the procedural code and common sense. We proposed to the Central Bank that insufficient capital adequacy be grounds for revoking a bank's license. But we also think that the Central Bank should have to go through the courts to revoke a bank's license.

At the moment, the Central Bank doesn't have to go through the courts to appoint temporary administration in a bank. We've gotten the Central Bank to agree that the director of the temporary administration will always be a Central Bank employee and never a private individual with a license or attestation. The Central Bank must be responsible for the temporary administration. The temporary administration's job is to identify grounds for revoking a bank's license or initiating bankruptcy procedures. We want to speed up bankruptcy procedures, but without cutting the courts out of things."

Tatyana Paramonova, first deputy chairwoman of the Central Bank of Russia.

‘Our priority today is to make sure there's no systemic banking crisis in the country. This doesn't mean not letting banks go bankrupt, it means ensuring overall financial stability in the sector.

There are no grounds under current legislation for us to start massively revoking banking licenses as we did just after the crisis, but restructuring of the banking sector must move on. There's a package of laws currently under discussion which includes measures such as revoking licenses of weak banks with capital adequacy below 2 percent.

Another priority for reform is to bring accounting and reporting procedures for commercial banks into line with international standards. Some Russian banks are already using both Russian and international systems.

Changing the tax rules for banks is another priority. High tax rates were introduced when banking was far more profitable, while now we are seeing decapitalization of the banking system because of high risks in the real sector and lack of income, which make it hard to turn a decent profit.

Regarding mergers and acquisitions, decisions can be imposed in cases of state banks, banks in difficulty or under ARCO administration. In the case of private banks, shareholders, creditors and clients must realize that the number of banks must decrease in favor of bigger banks and that only by introducing modern practices will banks survive over the next few years.

The payments system is also important. In this country, 96 percent of payments are now electronic, but if we want to develop the market, we need a system of real-time transactions. If we don't start working on this, we'll end up lagging in our development."

Oleg Kiselyov, board chairman of Impexbank.

‘It would be wrong to say that banking reform isn't happening. There may not be a specific government and Central Bank action plan on the matter, but reform is going ahead. We had imagined a two-tier banking system with the Central Bank on one level and commercial banks on another. State banks would continue to exist in parallel, though with a trend toward restricting their influence. The idea was that these banks would transform into government agencies concerned with investment programs and cease to function as lending institutions.

But I don't like what is happening today in the banking sector. Instead of a two-tier system, we have a de facto three-tier system. The third tier is the banks with state participation – Sberbank, Vneshtorgbank, Vnesheconombank and the so-called development banks. Thanks to tacit support from the state through the Central Bank and government, this group of banks is very strong today.

Certain traditions have developed in Russia over the years, and this can't be ignored. This concerns particularly debt servicing and arms exports, which are under state control. I think a government agency could handle military exports. I'm absolutely against the idea of lending to the agricultural sector through a state institution. Once land reform goes through, there'll be no need for this. ... As for Sberbank ... no one in his right mind would try to compete with a bank that has 86-87 percent of household deposits. But lack of competition can have disastrous consequences. What we have is a totally unhealthy, uncompetitive, quasi-market situation.

We have to change this. ... We could adopt a two-step model in which other banks would have access to guarantees on the basis of tenders, and then, once the resources are sufficiently re-allocated between Sberbank and lending institutions, the guarantees would be abolished."

Alexander Mamut, board chairman of MDM-Bank.

‘The main problem with the banking sector is that it doesn't function according to market principles. Instead of being a tough, competitive environment where firms fight to provide various services, the sector is monopolized by state banks like Sberbank, Vnesheconombank and Vneshtorgbank. In his federal address, Vladimir Putin said he supports private initiative and would protect property rights in all sectors including the banking sector. But nothing being done reflects this.

The main source of banks' capitalization isn't profit, but the market itself. If the market is competitive and attractive, banks will have adequate capitalization. I'm sure there are people who would buy banks like MDM-Bank and Alfa Bank for good money, real money, but they won't as long as they see there are no rules in this market. The rules are set by a bank with 40,000 branches, state guarantees and 90 percent of household deposits.

The first thing to do then is to make all banks equal by abolishing the state guarantees. The second thing to do – if the state banks have been created for their declared purposes: to support export, state investments, and so on – would be to issue these banks special licenses for these particular activities and nothing else.

It's right that budget money goes through the treasury, but why can't banks other than the Central Bank work with treasury funds? Our bank has no problem with bad borrowers, even though industrial companies make up our entire loans portfolio. We loan to exporters, builders and companies that normally work on the domestic market.

This is our main business and we know how to do it. But we're excluded from working with the treasury. Officials say this is because the treasury sterilizes the money base, but in fact, it sterilizes the banking system and prevents it from developing."

Pavel Medvedev, chairman of the State Duma Subcommittee on Banking.

‘The State Duma doesn't oppose adopting improvements to legislation. It's not the Duma that's the problem at the moment, but rather the absurd procedure laws go through to get adopted. We in the Duma are like a squirrel in a wheel, running round and around and unable to stop. We get the impression that the government simply does not know how to write banking laws. Not one banking law proposed by the government has been written so that we could pass it immediately. Even laws drafted by other people become indigestible once they've been through government hands.

The law on restructuring is a prime example. It was drafted in the Duma and sent to the government with the hope that the government would then send it back to the Duma quickly, and the whole adoption procedure would thus be speeded up. But the government spent a year working on the law. Finally, we did recently receive from the government a package of additions and amendments to the banking laws. The ideas in them are good, but the way they're expressed is unbelievable. To give an example from the law on subordinated loans: "In the event of a bank bankruptcy, subordinated loans are the last to be returned. Therefore, in the present law, subordinated loans are those loans that are returned last."

There is nothing wrong with the idea, but a law must be written in clear and precise language. What gets adopted is a particular draft of a law and not a general idea. When disputes arise, it is the text of the law that will be used to resolve them. But so far, it is proving very difficult to reach agreements with the government.

We do have to give the International Monetary Fund due credit for the contribution it's made in bringing some pressure to bear on the executive authorities, though at a practical level, this hasn't changed much. The IMF periodically sends a mission, asks what we've done, what we've not done, and then leaves. The IMF has never tried to help us draft laws.''