Yeltsin Blames Bankers for Paralysis, Panic in Markets : Russia: President also criticizes government for not repaying bank loans on time and in full.

MOSCOW — President Boris Yeltsin gave top Russian bankers a tongue-lashing in the Kremlin on Thursday, blaming them for a financial crisis last week that caused panic and forced a halt in trading.

Yeltsin also criticized his government for not repaying banks on time and in full for loans to the state, the president’s office reported.

Rumors that some large banks had become insolvent paralyzed the fledgling market for nearly two days last week. The crisis has eased somewhat this week, but the markets are still nervous.

In New York on Thursday, the head of Russia’s biggest private commercial bank said the worst is over. But Vladimir Vinogradov, president of Inkombank of Moscow, also said 10% of the 3,000 or so banks in Russia may go under within the next year as a result of the current crisis.

“The difficult situation in the banking sector in the last two weeks is a result of many bankers lacking the skills to work under new conditions,” Yeltsin said. “Still, the central bank also was slow to act.”

The tough lecture comes at a difficult time for Russia’s banks, which have been seeking Yeltsin’s help in cracking down on the growing number of violent, often fatal attacks on bankers.

The bankers have also sought Yeltsin’s support in smoothing out the private sector’s rocky relations with the central bank, which has recently tightened reserve requirements in an effort to stamp out inflation.

The central bank’s moves, plus a stabilization of the ruble, have cut into bank profits and contributed to their liquidity crisis.

The government moved to help last week, offering $68 million in seven-day loans to banks and buying $277 million in treasury bills. The private banks felt that was too little too late.

At the Kremlin meeting, Yeltsin reaffirmed his government’s commitment to reducing inflation and said it would not solve budgetary problems by printing more money, which would fuel inflation.

Banking is one of the most profitable sectors in the Russian economy, with financial moguls benefiting from high inflation for their speculative and lucrative deals.

But the sector remains largely unregulated, and the central bank has only recently begun to crack down on the unruly market.

Yeltsin also told the bankers they had a lot to learn from Western banks and that the sector should be more open to foreign banking. Russian banks have fiercely resisted Western banks, fearing they would quickly capture market share with better service, access to international markets and bigger resources.

Yeltsin also urged bankers to try to improve relations with the public. Many Russians are reluctant to put their money in banks despite high interest rates because they don’t trust bankers and fear financial collapse.

Western analysts have long said a major shake-up among Russia’s banks is inevitable and could even be useful in consolidating the market and weeding out smaller, unstable banks.