lending. banks ’ nominal profits have recovered to the pre - crisis level of roughly one trillion rubles, though real profits are still below the pre - crisis readings. in relation to 2013 prices, profits are still 30 % lower. we expect banks to use their profits to boost growth in the banking business, and to step up lending. to do so, they should convert the bulk of their profits into capital. currently, financial statements suggest that 88 % of profits will be converted into capital. i hope that the final figure, after profit allocation between shareholders has occurred, will not differ greatly. furthermore, banks ’ profits increased by 212 billion rubles in the first two months of 2017, a growth rate 2. 5 times that of the same period of the previous year. despite the fact that the current situation in the banking system is quite good, we believe that changes are brewing, which will allow the banking system to more efficiently meet citizens ’ demand and economic development objectives. both bills which we consider to be pivotal - the proportional banking regulation bill and the new resolution mechanism bill - have passed the first reading at the state duma. we have already discussed these in detail on many occasions, therefore today i will dwell only on the amendments introduced to the bills to be considered by the state duma in the second reading. as regards proportional regulation, i would like to return to the promotion of competition. when we first proposed the concept, many small banks voiced concerns that they might face tougher competition. we took this concern very seriously and have held many discussions on the matter. however, we do not think that the three - tier system disrupts competition. instead, it will boost the stability of banks - irrespective of their size - and result in more realistic business models in the future. in addition, the system not only imposes restrictions on operations, but also considerably eases regulatory burden for banks holding basic licences. banks holding basic licences will have to comply with only five required ratios and will not have to meet new highly technical standards. along with two capital adequacy ratios, one current liquidity ratio and two credit concentration ratios will be applied. the current version of the bill, though aiming to focus small banks on servicing small businesses and individuals, provides a more flexible mechanism and allows lending to larger borrowers if they comply with both a more strictly concentrated ratio of credit risk per borrower and the related party risk ratio. we took these comments into account after the dialogue and

the arb, though emphasising the importance of competition, nevertheless tolerates misreporting, fraud and the violation of laws. the association neither condemns dubious operations nor seeks to develop good standards of practice. furthermore, they demand that we turn a blind eye to problems arising in banks. this is exactly what the arb means when it insists that we ‘ not revoke so many licences ’. however, we abide by the law and take measures stipulated by the law. managers of those banks from whom licences were revoked used to be members of the arb board, i. e. in the best case these people were not particularly gifted or responsible bankers, and as a result they triggered the collapse of their credit institutions. here we are faced with a question about which objectives and targets the association can deliver 1 / 4 bis central bankers'speeches on. should it set standards ( including ethical ones ) for the banking sector ; should it be the voice of the banking community in dialogue with the regulator or should it stand up for ‘ bad ’ banks? i would like to place special emphasis on the fact that when the bank of russia withdraws unstable or fraudulent credit institutions from the market, it first, protects the interests of depositors and creditors, and only thereafter is interested in protecting the interests of scrupulous banks. the clearing of the banking sector is yet to be completed, therefore corporate customers will not just choose from banks offering products and services they need, but seek to mitigate the risk of losing money. in particular, it also manifests itself in the authorities ’ efforts to determine specific criteria for banks, or a list of banks, which can be entrusted with budget funds and the funds of public companies. the arb raised the point that these criteria restrict competition. let me repeat, competition is undermined by fraudulent banks which remain on the market, while attempts to limit risk by means of registers and criteria are just a corollary. by and large, we would like to avoid a situation in which competition for the benefit of a customer in the form of the state or a public company, is undermined by such lists or unreasonable criteria. therefore we suggest a course of action wherein only limited supervisory information is disclosed to a potential customer, with the bank ’ s consent, if that customer is seeking to raise public funds. we believe that this approach may help to ensure a competitive environment for banks of different size. i am certain that banks convinced of their own stability will