One of Russia's top bankers urged tougher regulation of his own industry, warning that in an economy flush with oil money, loans were given too easily and could be the seed of a future crisis.
“Banks are softer now on providing loans….That's a dangerous thing,” Pyotr Aven, head of the country's largest privately-owned bank Alfa-Bank, told Reuters in an interview on Thursday, pointing to the surge in revenues from oil, Russia's major export earner.
“That's a potential threat for a next crisis. I don't see serious signs but it might happen.”
He added that the economy now was in far better shape than in the run-up to the 1998 crisis which was triggered by massive domestic debt problems.
Aven, who was Russia's foreign trade minister just after the collapse of the Soviet union, said Western accounting practices were an important element in instituting better controls. He estimated that only about 100 of Russia's around 1,200 banks had introduced international accounting rules.
But he was concerned that the central bank would delay moves to force banks to adopt such procedures.
“Banking supervision has to be strengthened, as tough as possible….the central bank has to be tougher…you need more control and more transparency.”
He was not concerned about Russian banks falling by the wayside in the process.
“Hopefully 50 percent of Russian banks will die.”
He also raised the common Russian banker's lament over the unequal treatment of banks, with state banks often getting special treatment.
He pointed, as an example, to state-controlled Sberbank <SBER.RTS> whose retail deposits were effectively guaranteed by the government, and so attracted the lion's share of dwindling Russian deposits.
A draft law for a new deposit guarantee system has been lauguishing in parliament with no signs that MPs are in any rush to push it through soon. The bill aims to protect private depositors against loss if their bank goes bankrupt. It would erode the de facto monopoly of Sberbank and facilitate the growth of a private banking industry.
Aven said he was less concerned about whether Russia had deposit guarantees, than that other banks were on the same footing with Sberbank.
“Sberbank has to be in the same position as everyone else. All banks should be equal…the sooner there is a unified system, the better for everybody,” he said.
Better to go it alone
Lack of transparency masked the real financial positions of banks and has discouraged Alfa from acquiring smaller banks in its bid to expand its retail business nationwide, he said, adding it was often better to start up on your own.
The bank is part of the giant Alfa Group conglomerate which is involved in many of Russia's key industries.
Aven noted that Alfa-Bank was getting a 30 percent return on capital and has already grabbed four percent of the Moscow retail deposit market, and 2.5 percent nationally.
When the figure gets to five percent, the bank might have to review its next step. One option might be to sell a stake but so far high returns have not brought suitors around.
Aven believes Russian banks would remain dominant domestically even though a few international giants such as Citibank have set up shop in Russia.
“We were sure that in five years, we would be bought by Citibank or Raiffeisen or someone,” Aven said of the bank's start in 1993. “It was our target.”
“After 10 years of sitting in this room we have had no serious offers…But we don't regret it…we're making 30 percent returns.”
Additonal reporting by Melissa Akin
Reporting by Jonathan Thatcher, editing by Josephine Ng;
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