The chief executive of Russias largest privately-owned
bank has called on the government and the nations central
bank, headed by Sergei Ignatiev, to rework their strategy for
boosting lending to the real economy.
Johann Jonach, chief executive of Alfa Banking group, the
international holding that includes Alfa Bank of Russia and
five foreign subsidiaries, told Emerging Markets: The
Russian banking system is not in bad shape, because of the
liquidity support provided by the authorities at the end of
But step by step interest rates on refinancing have
been increased. Now half-year funds cost 16% in roubles.
On the one hand the authorities are urging us to lend
at 16%, and on the other the central bank is refinancing at
16%. That is a problem.
The only other alternative funds available are subordinated
loans being offered via Vneshekonombank, which have conditions
attached that many banks are unwilling or unable to meet.
This is a dilemma that the authorities will have to
face, Jonach said.
The first tranche of VEBs subordinated loans, were
offered at the end of last year to Russian banks whose
shareholders put up new capital. VEB then matched the amount of
new equity one-to-one. Only Alfa bank, which received 10
billion roubles, Nomos and Khanty-Mansiisk banks
With the second tranche, announced this week, VEB will offer
a loan three times the size of new equity to all banks with a
capital base of 3.5 billion roubles or more, i.e. 95 or so of
the largest banks. It is reported that there will be
restrictions on the way that funds are disbursed, and on
interst rates charged.
We will see whether the scheme will work, Jonach
said. The authorities aims are understandable. But
the amount of funds that will get to the real economy this way
will not be enough to save it.
He said that central bank refinancing for terms of more than
180 days, which is not currently available, would be of much
greater benefit to the real economy. This is the biggest
The largest lenders to Russian industry at present are the
state-owned banks, which have provided support to enterprises
hard hit by the recession with reference to social as well as
Jonach at Alfa said that, while the governments
concern with social policy was natural, the danger
was that a large volume of loans was being made and
its not clear how the state banks will get their money
Pavel Gurin, chief executive of Raiffeisen Bank Moscow, one
of the largest foreign-owned banks, told Emerging Markets that
banks will need to reduce the volume of non-performing loans in
their portfolios, and get more confident with customers
balance sheets, before providing working capital again.
The main activity now is refinancing bilateral
lines, Gurin says. The level of working capital
needed is lower in sectors where costs have come down, but even
so its difficult to provide whats needed. The level
of NPLs is growing throughout the banking system and we are all
concentrated on customers risk profiles.
Gurin added: The Russian banking sector does not have
a problem with liquidity, in contrast to many of its
neighbours. That issue was addressed very effectively by the
authorities last year in the immediate aftermath of the
financial crisis. And the country has its own financial
resources. The problem is NPLs and the indebtedness of