The Central Bank of Russia (CBR) has cut the number of bank supervisors almost in half as the number of banks in Russia drops below 500 and the clean-up comes into the end game.

As a result of the centralisation of banking supervision, the central bank dismissed about 45% of its staff, reducing their number to less than one thousand people, said deputy chairman of the CBR Olga Polyakova in an interview with Rossiyskaya Gazeta.

“There was a selection, professional testing, and employees who claimed or already held senior positions were also tested for their ability to manage processes,” said Polyakova.

Since she took over as CBR governor in 2013, Elvira Nabiullina has been steadily closing 100 banks a year to make the sector easier to supervise. At its peak during the “wild cat” banking days in the 1990s Russia had over 4,500 banks, many of them simply money laundering scams or at best “glorified treasury operations,” as bank analyst Kim Iskyan famously called them.

With so many small banks operating in the regions and doing very specialised operations, the CBR has struggled to supervise the sector properly. Last year it named some 25 banks as “systemically important” and beefed up its supervision of these banks, but the regulator has been closing the small banks down.

The central bank conducted a two-year banking supervision reform, completing it in October. Supervisory functions were concentrated in two divisions in the central office of the central bank: the service of current banking supervision and the department of supervision of systemically important credit organisations. Employees of the service are representatives of the central bank in the regions who are in contact with banks.

According to Polyakova, this supervision reform has increased the manageability of the sector, eliminated regional differences in the approaches to assessing the business models of banks and removed unnecessary links in the decision-making process, making oversight more operational and easier. Polyakova noted that the centralisation of supervision, among other things, solved the problems associated with the fact that regional units were “too imbued with sympathy” for the banks they were supposed to supervise.