Plans to divest the Central Bank from Vneshtorgbank, the country's top bank by equity, should be ready by the end of the year, Vneshtorgbank CEO Yury Ponomaryov said Monday.

The Central Bank's stakes in the country's two largest banks -- 99 percent of Vneshtorgbank and 63 percent of Sberbank -- have raised conflict-of-interests issues given its role as watchdog.

"First we need thorough analysis, which a major investment firm is now working on," Ponomaryov said. "When that is complete, a series of scenarios on how to change Vneshtorgbank's ownership should be developed."

The final decision -- whether privatization or the transfer of the Central Bank's share to another government body -- is up to the government. The government and the Central Bank last year committed to withdrawing the bank's ownership by 2003. The Central Bank law must be changed first, but amendments now in the Duma still provide for Central Bank ownership.

Michael Fuchs, head of the World Bank's private and financial sector programs in Europe and Central Asia, has recommended the Central Bank sell its share in Vneshtorgbank to a foreign strategic investor, agencies reported.

The Central Bank met the World Bank's recommendation with little enthusiasm. "A foreign investor should buy a weak bank or set up a new one. We should not sell good banks to foreigners," Reuters quoted Alexei Simanovsky, head of the Central Bank's banking control department, as saying.

Mikhail Matovnikov, deputy director of Interfax Rating Agency, said moving the Central Bank's stake to the Finance Ministry is more likely. "The Central Bank has put more than $2 billion into Vneshtorgbank's share capital. Any attempt to sell it now would result in a huge loss for the government," he said.

Vneshtorgbank announced net profit of $79 million in its results for the first half of 2001 under international accounting standards. In January, the bank introduced new methodology to account for the securities it owns. Using comparable accounting techniques, net profit jumped by 33 percent to $272 million from $205 million in the first half of 2000.