Lower quantity but higher quality?
Licenses of the ‘weakest' banks might be revoked in the near future, Russia`s finance minister Alexey Kudrin said in a statement at the ‘Russia Calling!' investment forum. The upcoming toughening of requirements and standards that were considerably softened during the crisis is now one of the most discussed issues in the banking community. The Mezhprombank (in the top 30 banks by assets) example has shown that any bank can fall into the ‘weakest' category. Authorities' desire to ‘adjust' the number of lenders is supported by (quite a disputable) suggestion that there is an excessive number of banking institutions across Russia. However if we turn to the officially published indicator[1]‘Availability of institutions providing payment services to households' (the number of credit institutions including their branches and subdivisions per capita), Russia is comparable to the developed countries of Europe and to the US. Meanwhile, the quality level of the so-called ‘payment service supply' for Russia's population is much lower than that in Europe or the US. Lack of competition in the banking service market (even with the presence of foreign-owned banks) allows domestic credit institutions to minimize efforts for attracting customers. There is little hope that competition will sharpen when new foreign bank branches open after Russia joins the WTO, as experience shows that foreign credit institutions quickly integrate in the existing system and optimize their expenses.
[1] http://www.cbr.ru/statistics/p_sys/print.aspx?file=sheet001.htm
By Galina Kovalishina
Head of the Corporate Finance Department
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