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A. Radygin, N. Shmeleva Efficiency of banking operations in the first 3 quarters of The comparison of the return on assets (ROA) indicator across the first 3 quarters of 2004 in annual terms with the respective indicator registered in 2003 demonstrates that in spite of the liquidity crisis, which occurred in the spring and summer of the last year, the profitability of banking operations in 2004 exceeded the figures of 2003. As concerns the operating banks (without the Sberbank), on the average the ROA indicator in the first three quarters of 2004 made 3.3 per cent, while in 2003 the banks had to be content with the level of 2.8 per cent. At the same time, the crisis had the characteristic impact on the dispersion of the ROA values. Similarly to the period of the most significant banking crisis of 1998, the profitability of operations of small banks increased. As it is seen in Figure 1, in 2003 the lowest value of the ROA indicator across the groups of banks as broken down by the amount of their assets was registered in the group of smallest banks19, which on the average demonstrated a loss at 0.3 per cent of the assets. However, already in the first six months of 2004 the smallest banks again demonstrated positive values of profitability (2.5 per cent), while the number of banks operating at a loss made less than 5 per cent of the total number of banks in this group (see Group 6 in Figure 2). Positive values of profitability persisted in this group also over the three first quarters of 2004 (the ROA indicator made 2.7 per cent over this period).

% -1 2 3 4 5 Groups as broken down by the amount of assets as on January 1, 1- banks, ranked from 1 to 2- banks, ranked from 11 to 3- banks, ranked from 51 to 4- banks, ranked from 101 to 5- banks, ranked from 201 to 6- banks, ranked from 501 to Note: hereinafter the groups were set forth in accordance with the amount of assets as registered at the end of the period, at the same time in the calculations there were used the average values of assets Calculated basing on the database presented by the firm STIiK Fig. 1. ROA in 2003 as broken down by groups depending on the size of assets (without Sberbank) Hereinafter the relative indicators of profitability over the period are compared with the average amount of assets over the period.

Similarly to the previous reports, all Russian banks were classified in groups basing on the amount of their assets. Ten largest banks (without the RF Sberbank and the RF Vneshekonombank) are included in the first group, 40 next banks are included in the second group, 50 next banks are included in the third group, 100 next banks are included in the fourth group, 300 next banks are included in the fifth group, and the sixth group is comprised of the rest banks (the smallest banks).

% -1 2 3 4 5 Groups as broken down by the amount of assets as on July 1, 1- banks, ranked from 1 to 2- banks, ranked from 11 to 3- banks, ranked from 51 to 4- banks, ranked from 101 to 5- banks, ranked from 201 to 6- banks, ranked from 501 to Note: hereinafter the groups were set forth in accordance with the amount of assets as registered at the end of the period, at the same time in the calculations there were used the average values of assets Calculated basing on the database presented by the firm STIiK Fig. 2. ROA in the first six months of 2004 in annual terms as broken down by groups depending on the size of assets (without Sberbank) At the same time, the differentiation of the indicators of efficiency across the groups of banks decreased. While at the end of 2003 the ROA indicator fluctuated across the groups formed on the basis of the amount of assets from -0.3 per cent to 3.7 per cent, at the end of the 3rd quarter of 2004 these values were in the band from 2.6 per cent to 4 per cent (see Figure 3). The crisis affected only certain banks and had no significant impact on the efficiency of operations performed by the largest banks (Group 1 in Figures 1 3). While at the end of 2003 the average value of the ROA indicator in a group made 2.4 per cent, over the first two quarters of 2004 the profitability of operations has even increased somewhat (up to 2.7 per cent). At the end of the 3rd quarter of 2004, the profitability made already 3.per cent. It should be noted that by the end of the 3rd quarter of 2004, the ROA indicator demonstrated a spread of values across groups of banks formed on the basis of the size of their assets non-typical for the Russian banking system. Often the group of the largest banks (without Sberbank) demonstrated one of the lowest values of ROA (for instance, at the end of 1998, 1999, and 2001). The first three quarters of 2004 turned out to be favorable for the first largest ten banks than for the banking system at large (3.6 per cent as compared with 3.3 per cent).

Since the crisis, which occurred in the middle of 2004, primarily affected the market of interbank credits, the analysis of the respective indicators from the point of view of its impact on the indicators of profitability of banking operations is of a special interest.

As concerns the groups of banks formed on the basis of the size of their assets in the beginning of the year, the highest value of the indicator of the share of granted interbank credits in per cent of assets was registered in the third group (banks ranked 51 to 101 in terms of the size of their assets). While on the average across all banks (without Sberbank) this value was registered at 6.8 per cent, in the third group this value made 8.9 per cent. As it is demonstrated by the data presented in Figure 3, exactly the third group demonstrated the highest levels of the ROA indicator at the end of the first six months of 2004.

% -1 2 3 4 5 Groups as broken down by the amount of assets as on October 1, 1- banks, ranked from 1 to 2- banks, ranked from 11 to 3- banks, ranked from 51 to 4- banks, ranked from 101 to 5- banks, ranked from 201 to 6- banks, ranked from 501 to Note: hereinafter the groups were set forth in accordance with the amount of assets as registered at the end of the period, at the same time in the calculations there were used the average values of assets Calculated basing on the database presented by the firm STIiK Fig. 3. ROA in the first three quarters of 2004 in annual terms as broken down by groups depending on the size of assets (without Sberbank) % 1 2 3 4 5 Groups as broken down by the amount of assets as on July 1, A interbank credits to Russian banks B interbank credits to nonresident banks 1- banks, ranked from 1 to 2- banks, ranked from 11 to 3- banks, ranked from 51 to 4- banks, ranked from 101 to 5- banks, ranked from 201 to 6- banks, ranked from 501 to Calculated basing on the database presented by the firm STIiK Fig. 4. The share of interbank credits in the assets of banks as in the middle of 2004 as broken down by groups depending on the size of assets (without Sberbank) At the first glance, this picture does not seem logical; however, it was formed because the indicators of two banks, whose profitability at the time exceeded 15 per cent, had a significant impact on it. In the case these two banks are excluded, the average value of the ROA indicator in this group observed in the first six months of 2004 declines to 2.8 per cent, what is the average level of the indicator for the banking system at large (without Sberbank). Besides, it should be taken into consideration that Russian banks placed a significant part of their assets with foreign banks. While in the middle of 2004 the average value of the indicator of the credits granted by all banks was at 8 per cent of the assets, the share of the Russian banks made less than half of this figure (3.7 per cent). It should be noted that in the 3rd group this ratio made 38 per cent (3.8 per cent as compared with 10 per cent).

In the middle of 2004, the highest share of credits to the Russian banks was demonstrated by the banks included in the 4th group (4.9 per cent, see Figure 4). However, even in this group the higher share of interbank credits did not significantly affect the indicators of profitability. At the end of both the first six months of 2004, and the first three quarters of the same year, the average value of the ROA indicator in this group was close to the average (2.7 per cent in 2 quarters and 3.2 per cent in quarters respectively).

L. V. Mikhailov, L. I. Sycheva Issues discussed at the meetings held by the Government of the Russian Federation on February 3, 10, and 24 of Among the all issues discussed at the meetings held by the Government of the Russian Federation in February, the most interesting ones were the following. On February 3, there was discussed the report presented by I. Yu. Artemiev, the Head of the Federal antimonopoly service, which concerned the draft federal law On protection of competition. The new law should cover the issues of legal regulation of the measures relating to the protection of competition and curbing of monopoly activities. At the meeting held on February 10, G. O. Gref, the Minister of Economic Development and Trade, presented his report On measures aimed at the implementation of the land reform. The report set forth the key targets of the land reform for 2005 through 2007.

* * * At the meeting of the RF Government held on February 3 of 2005, I. Yu. Artemiev, the Head of the Federal antimonopoly service, presented the draft federal law On protection of competition, which envisages the improvement of the legal regulation of the measures relating to the protection of competition, the renewal of the legal tools aimed at the curbing and prevention of monopoly activities on commodity and financial markets, as well as the unification of the legal regulation of the measures aimed at the protection on commodity and financial markets.

The law envisages a transformation of the approach to the key concepts of the legislation on competition. In particular, the new law should more precisely define such terms as goods, commodity markets, groups of persons, dominating positions on the market and some others. Besides, the draft law sets forth the principally new approach to the control over the granting of allowances and privileges to individual economic agents by the state authorities and local governments, as well as monitoring of monopolistic activities. As concerns the abuse of the dominating position, agreements, and concerted actions aimed at the limitation of competition, the law sets forth the list of offences per se, i.e. the offences not requiring the confirmation of their negative impact on competition. One of the most significant innovations of the draft law is the introduction of clear and precise criteria, basing on which the agreements and concerted actions, although resulting in certain limitations on competition, but having obvious general positive effect and not resulting in the curbing and prevention of competition may be permitted by the antimonopoly authority. In accordance with the draft law, these criteria include the four conditions of permissibility of agreements and concerted actions set forth in the EU legislation.

The draft law sets forth the principally new approach to the control over economic concentration, which envisages the adjustment and a significant reduction of the group of transactions requiring the approval or notification of the antimonopoly authorities.

At the meeting held on February 10 of 2005, G. O. Gref, the Minister of Economic Development and Trade, presented his report On measures aimed at the implementation of the land reform. The report set forth the key targets of the land reform for 2005 through 2007:

1. The creation of conditions and completion of the process of re-registration of the rights of the permanent (unlimited) use of the plots of land as the right of ownership or lease of such land plots. It is envisaged that there will be revised the current procedures governing the formation of redemption prices and lease payments, the switching to the determination of such prices and payments on the base of the cadastre value of the plots of land, introduction of a special fee for the removal of the limitations on the land rights prohibiting reconstruction of existing buildings and new construction on the redeemed plots of land.

2. The completion of the process of delimitation of the state ownership of land and optimization of the distribution of the revenues derived from the management of land among the budgets of different levels. The RF Ministry of Economic Development and Trade presented the amendments to the draft federal law aimed at the simplification of the procedure governing the delimitation of the state ownership of land. It is planned that the draft law will set forth the notification procedure of registration of land rights and the settlement of claims concerning plots of land at the stage of registration of the respective rights.

3. Switching to the new land tax and the tax on residential real estate, the formation of a full fledged register of the objects of taxation and development of the institution of large scale appraisal of real estate.

4. The switching from the cadastre based registration of the plots of land to the cadastre based registration of the real estate objects and the creation of the cadastre of real estate, the improvement of the requirements pertaining to the formation of the objects of the cadastre registration.

5. The improvement of the mechanisms setting legal limitations on the use of the land and real estate, the introduction of requirements concerning the granting of plots of land for construction of office and trade premises exclusively via auctions.

The RF Ministry of Economic Development and Trade also proposes to introduce amendments to the RF Budget Code envisaging that the revenues derived in the course of sales and leasing of the plots of land under the real estate objects should be distributed in accordance with the unified scheme: per cent of such amounts should be due to the RF federal budget, 35 per cent should be granted to the RF subjects budgets, and 50 per cent should be transferred to the budget of the respective local government.

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