| | Top Russian Central Banker gunned down
MOSCOW, Sept. 14 —A top Russian bank regulator who had been engaged in an effort to reform Russia’s corrupt and risk-laden banking system died early today after being shot on the street the night before.
Andrei Kozlov, 41, the first deputy chairman of Russia’s Central bank, had been leading a drive against money laundering and to bring stability to Russia’s rapidly expanding banking sector. Among many programs in his portfolio, he had been closing down disreputable banks by withdrawing their licenses, a practice his colleagues said had made him enemies in criminal circles.
The authorities and Mr. Kozlov’s colleagues described the shooting as a contract killing, making the crime an immediate reminder of the lingering dangers in the coarse and unruly worlds of Russian business and power.
“It was criminals taking revenge for the legal actions of the Central Bank, and unfortunately Mr. Kozlov paid the price,” Oleg V. Vyugin, a former colleague of Mr. Kozlov’s at the Central Bank who is now Russia’s chief securities regulator, said in a telephone interview.
Of the assassinations of government figures during the six-year administration of President Vladimir V. Putin, Mr. Kozlov was among the highest-ranking.
Although Mr. Putin made no immediate public statement, there were signs of Kremlin concern; Prime Minister Mikhail Y. Fradkov ordered the nation’s senior police officer to provide him with regular reports on the investigation.
Mr. Kozlov’s driver was also killed in the shooting, which occurred when two men with pistols ambushed them as they left an arena where he had just participated in a soccer game. There were no immediate arrests in the case. The police said the assassins had escaped on foot, throwing away their pistols as they ran.
At the Central Bank, Mr. Kozlov had been responsible for pushing the chaotic banking sector here through transition from a fragmented and opaque industry serving wealthy businessmen to one able to accommodate retail customers from a middle class steadily growing with the trickle down of oil money.
Those reforms had largely stalled amid opposition from politically connected banks, known as the “pocket banks” of the oligarchs. Many are risky for retail customers because much of their lending portfolio is tied up with a single business — that of their oligarch owner — the collapse of which would bring down the bank.
Mr. Kozlov’s mandate was closing banks deemed insolvent and encouraging the consolidation of Russia’s 1,200 banks, to protect consumers now flooding into the banking system.
As news of his death settled over the work day, the business community here buzzed with theories.
“The obvious suspicion is there was a small bank, with very dirty transactions, run by criminals of a very nasty character,” said Nikolai A. Kovarsky, a private consultant and one of Mr. Kozlov’s friends. “And they got information that they were about to be closed.”
“Everybody I’ve spoken to believes it’s related to his enforcement,” said James R. Fenkner, managing partner at Red Star Asset Management. “It’s really a throwback to the ’90’s, an anomaly.”
Since 1995, 24 Russians who held senior posts in the country’s banks have been assassinated, according to newsru.com, one of Russia’s best-known news Web sites.
But the pace of such killings had declined, and Kr. Kozlov was working to give the industry a newer face.
His efforts came as the industry has been swiftly changing from its reliance on large companies and oligarchs. Demand for consumer credit doubled last year and is projected to grow quickly for years; mortgage lending in Russia, for example, is .02 percent of gross domestic product, compared to between 4 and 10 percent in Eastern Europe.
To improve the credit of Russian banks, Mr. Kozlov raised the minimum reserve deposit commercial banks must maintain with the Central Bank, to 5 million euros from 1 million; the reform, however, applied only to new banks and was not a threat to existing small banks.
In another reform intended to secure deposits, he was pressing tighter rules on lending to large customers, intended to encourage the oligarch “pocket banks” to merge with other, more diversified banks.
He had also investigated money laundering, a risky endeavor here, but one he pursued personally. “It was his brain child,” Mr. Kovarsky said. “All the data used to pursue banks was his.”
After the 1998 financial crisis that touched off runs on Russian banks, Mr. Kozlov was instrumental in providing Central Bank support to refloat some ailing banks while promising to close dozens of insolvent organizations; it was this reform effort that later stalled.
His changes won praise from Western bankers but were contentious. In a sign of popular mistrust of banks in Russia, in 2004 Mr. Kozlov unintentionally set off a banking crisis by revoking the license of Sodbusinessbank, citing regulatory violations and money laundering.
At the time, there was no deposit insurance. That sparked runs on other banks rumored to be under investigation by Mr. Kozlov. In response, the Central Bank introduced deposit insurance that year.
As police investigated today, Eugene K. Lawson, president of the United States-Russia Business Council, said in a statement that Mr. Kozlov “was among the brightest stars in the Russian government.”
Given his stature and the dangers inherent in his work, at least one friend seemed astonished that he was traveling about Moscow with only a driver. “For this the management of the Central Bank is to blame,” said Mr. Kovarsky. “A man with such a job should be guarded by 10, 15, 20 people.” This is horrible, and indicative of how far Russia still has to go for it to be considered a viable place to put funds. The country needs people like Kozlov who can fix the problems with Russia's banking system, because a stable and working banking system is necessary for any sort of investment industry, be it in capital or stocks or whatever, to form.
This is a truly major setback for Russia's economy if they don't find someone with the balls to take up where Kozlov left off.  |
09-14-2006, 05:21 PM
