Surviving Russian Banks Adapted to New Conditions

07.09.2009 — Analysis

The peculiarity of the Russian banking system is the inventory of short term liabilities and comparatively long term assets. Long term resources have become even more limited for banks; however, financial organisations have already learned how to work in the changed situation. This is the opinion expressed to RusBusinessNews by Pavel Gurin, Chairman of the Managing Board of ZAO Raiffeisenbank.

- Austria's Raiffeisen International Bank-Holding AG is one of the first international companies that started working in the Russian financial market in 1996. What main difficulties have you had to face? Have they been overcome?

- I would prefer to call it not "difficulties" but achieving goals along the way of the company's development. Since its opening in 1996 Raiffeisenbank has gone through several stages of the establishment and development in the Russian market - overcoming the 1998 market situation, developing the corporate business, beginning to work with private clients, entering the corporate bonds market, and establishing subsidiaries in the sphere of leasing, asset management, and pensions.

One of the most important events in the bank's life happened on 23 November 2007 when ZAO Raiffeisenbank Austria merged with JSC IMPEXBANK; as a result, Russia's largest credit organisation with foreign capital has emerged, operating under the brand name of ZAO Raiffeisenbank. We have obtained a branch network all over Russia.

The integration of two large banks, however, is a complex project of multiple stages. One way or another this would split into sub-projects which can be implemented either concurrently or sequentially. Now we continue to work on the issues of the integration. Many problems have been resolved, many we are starting to work on now. We work constantly thus going towards the projected result.

- What are the specifics of work in Russia for a bank with a 100% foreign capital? Is this an advantage or a disadvantage in our country?

- Subsidiary foreign banks do not differ from any others in Russia. Russian banking system in all its history has been characterised by several factors. One of them is the fact that the liabilities are short term, whilst assets - credits - are comparatively long term.

Banks never used to have a problem with funding before, the interbank market was comparatively large and the rates rather low. The situation now is different, measures undertaken by the Bank of Russia and the Government for the support of the market are helping banks to meet the payment requirements on their current liabilities.

Regarding the long term resources - banks always had a limited number of sources for these, they usually involved international borrowing markets. These are syndicated loans and Eurobonds. Banks' access to these resources is limited now. This is why banks have to review their credit policies and even more cautiously balance between the short liabilities and long assets.

Yes, sure, it is particularly hard now for banks to increase the long term credit volumes. This is obvious in the mortgage market where many banks have discontinued their programmes. The securitization market, on which they could count before, has almost gone too. The same can be said regarding the long term lending to companies in the real economy sector. It has become very difficult for banks to issue 5-7 year loans which are needed for companies to finance their development programmes.

- How would you assess Raiffeisenbank's performance at the time of the world financial crisis in comparison with Raiffeisen International banks abroad? Is it easier for banks to work in Russia than abroad or harder at the time of crisis?

- I would not want to compare the Raiffeisenbank's performance in Russia with performance of other banks of the group, this would be incorrect. I could only say that the crisis has affected all banks to a greater or lesser degree. In Russia, as in other countries, there are particular conditions for the work of financial organisations. We have witnesses some players leave the market, whilst the rest have adapted to the new conditions and carry on working.

Speaking of Raiffeisenbank, our goal has always been to ensure the efficient operation regardless of the conditions we are in. Today this means for the Bank first of all the tight risk management and banking processes optimisation. These, however, are the things which the Raiffeisenbank's team pays particular attention to in the day to day work. This attitude, probably, is what makes Raiffeisenbank one of the most reliable banks in Russia.

The interview has been prepared by Pavel Kober