The Ministry of Economic Development of the Russian Federation put forward a proposal under which the Central Bank of the Russian Federation would not be allowed to own bailed-out financial institutions for longer than five years, Vedomosti reported Oct. 11.

According to the proposal, which is part of draft amendments to Russia's law on the protection of competition, the five-year ownership period could be extended with a relevant decision issued by the Russian government or the country's president.

Ilya Torosov, who serves as Russia's deputy minister for economic development, believes the five-year ownership restriction would encourage the central bank to have a clear exit strategy from bailed-out lenders. He also pointed to the potential conflicts of interest that may arise from the central bank owning the lenders it supervises.

Meanwhile, the central bank criticized the ministry's idea, arguing that the rushed sale of bailed-out banks would make it difficult to retrieve funds spent by the regulator and the state on rescuing problem lenders. The regulator admitted that its direct ownership of bailed-out lenders affects competition, but added that it does not distort it since there are other factors that influence competition trends in the banking sector.

The central bank was also opposed to the proposed extension of the ownership period because the potential presidential and governmental involvement in the extension process would undermine the regulator's independence, Vedomosti said, citing the central bank's deputy head Sergey Shvetsov.

The Russian central bank took over several large lenders, including Otkritie Financial Corp. Bank, following a series of bailouts in the second half of 2017. The regulator also moved to bail out PJSC Asian-Pacific Bank in 2018 and PAO Moscow Industrial Bank in 2019. It tried to sell Asian-Pacific Bank earlier in 2019 but was not able to find an investor. Meanwhile, the central bank's sale of Moscow Industrial Bank is slated for 2020, while the sale of a 20% stake in Otkritie Financial Corp. Bank is planned for 2021, Vedomosti noted.