Russian Banks to Become Extinct Like Dinosaurs

It is reported that 50-80 per cent of the Russian market may be given to foreign banks
About 90 per cent of Russian banks are too small to compete with foreign ones, Russia's Prime Minister Mikhail Kasyanov says. The website of the GAZETA daily informs, the Russian prime minister made the conclusion after his meeting with Citybank President Stanley Fischer.

According to the daily, during the meeting with Mikhail Kasyanov, Stanley Fischer said that Citigroup (Citybank is part of the structure) was going to enlarge the volume of investments in Russia and open a saving banks network here. Citigroup does not mention the volume of its prospective investments, but Mikhail Kasyanov thinks the measure will force the Russian bank capital out of Russia's financial market.
Citigroup's capitalization ($58 billion as of beginning of the year) is three times as large as the whole of Russia's bank system (it makes up 581 billion rubles or a bit more than $18 billion). A high-ranking governmental official told Gazeta that "Citigroup's plans are a strong impulse for foreign businessmen who know the structure to come to Russia too." The capitalization of England's HSBC bank holding is $35 billion and that of France's Credit Agricole - $29 billion.
The daily states that Fischer's statement has caused no anxiety in the RF Government. It was perfectly clear already in the summer of 2003 that Russia's authorities were not going to protect the national bank sector from rivals. At that very period mass media reported the leak from the negotiations concerning Russia's incorporation into the WTO.
It was reported that at the beginning of 2003 the Russian delegation allowed the quota of 25 per cent of the Russian bank sector for foreigners; however in the summer the RF authorities became even more liberal and agreed to give 50 or 80 per cent of the market to foreign banks. The daily reports, Prime Minister Mikhail Kasyanov suggested the only alternative for Russian banks to survive: he said they might form large bank holdings capable of competing with foreign rivals, Lenta.Ru reports.
Experts say that Russian banks still have some time to improve the situation. Board member of the Guild of Financial Analysts Valery Petrov says that foreign banks have got two basic advantages - their capital and better technologies. At the same time, he adds that the population is still highly conservative; consequently, Russian clients are sure to prefer Russian banks to foreign ones when it comes to taxation optimization and organization of not quite legitimate finance. 

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Author`s name Michael Simpson