On the margins of the economy

The government pays little attention to banks

The success of the Russian banking system is largely explained by macroeconomic conditions, and it needs comprehensive reforms , believes the rating agency Standard & Poor's, which yesterday presented its annual report “Risk Analysis of the Banking Sector: Russian Federation.” Increasing transparency and reducing the number of banks are hampered by both resistance from business structures and insufficient government attention to the banking sector. In the near future, analysts believe, credit institutions will face problems of liquidity, repayment of external debt, and risks associated with elections. A positive factor is favorable conditions on the commodity market.

Russian banks are gradually strengthening their positions, says the S&P report. “There are positive structural changes, although many of the changes that occur are cyclical in nature and determined by favorable economic, political and industry conditions. The deterioration of these conditions could lead to crisis phenomena in the banking sector,” noted one of the authors of the report, Standard & Poor’s credit analyst Ekaterina Trofimova. The main reason for the overall increase in the creditworthiness of Russian banks remains the favorable macroeconomic climate.

“It is easy to see that the success of individual banks in strengthening their commercial positions and improving their creditworthiness is quite uneven, which explains the growing differences in their ratings,” the report says. --- The Russian banking sector has long needed reform: it could significantly speed up the process of raising ratings and give impetus to the development of banks. However, reform is moving slowly due to a lack of political will to correct serious shortcomings and resistance from influential circles whose interests are affected by this reform.” As Ekaterina Trofimova explained to Vremya Novostey, “reform means a wide range of measures: increasing transparency, strict compliance with the requirements for lending to related parties, disclosing the capital structure, reducing the number of banks in the system, etc. At the legislative level, this means strengthening the rights of creditors and the banking supervision system "

Such a reform will entail a reduction in the number of banks, and therefore it causes resistance from business structures, the specialist emphasizes. “But at the state level, unfortunately, there is no due attention to the banking system,” continues Ms. Trofimova. - It is not seen as a driving force of the economy, as in Europe and other developed and many developing countries. The government of Kazakhstan, for example, has taken a number of normative and regulatory measures, reduced the number of credit institutions by more than three times, and now the banking system plays a leading role in the economy. The Russian Central Bank is revoking bank licenses, but at this rate, we estimate it will take about ten years to reduce their number by half.” According to the analyst, the regulator’s tools for revoking licenses based on financial standards are ineffective, so it is forced to use the law “On Combating Money Laundering and the Financing of Terrorism” for this purpose. However, many banks that have lost their license under this principle could well be closed on the basis of unsatisfactory financial standing.

“In Russia, the emphasis is on strengthening and developing state-owned banks, which are viewed as a bulwark of system stability. At the same time, priority sectors of development, including nanotechnology, cannot develop without the effective functioning of credit institutions,” emphasizes Ekaterina Trofimova. In addition, according to the authors of the report, having experienced more than one shock since its formation in the late 1980s, the Russian banking system is still exposed to the risk of a sharp reduction in liquidity under the influence of panic sentiment. The aggravation of liquidity problems in the second half of August 2007 once again demonstrated the vulnerability of Russian banks to capital outflow and unfavorable conditions in the global financial market.

“The liquidity situation that developed in the Russian market at the end of summer looks tense against the backdrop of the previous abundance of money, when interbank lending rates approached zero,” says Alexander Golovtsov, head of the analytical research directorate at Uralsib Management Company. “But in reality this is just a transition from boom to normal development.” In his opinion, recently the economy has developed faster than the capital of banks has increased. The negative factors that the Russian banking system will face in the coming months are large tax payments and the repayment of external debt. Positive factors are an increase in budget expenditures on the eve of the elections, as well as a positive situation in the commodity markets, which will ensure an influx of funds into banks.

The head of the retail department of Raiffeisenbank, Roman Vorobyov, believes that the current legislation does not interfere with the development of the banking system: “There are certain operational aspects that need to be improved. Banks are indeed developing unevenly, but they had different starting positions.” In his opinion, the main problem for the banking system in the near future may be a liquidity crisis.

Nikolay KOCHELYAGIN