MOSCOW: The problems exposed in Russia’s banking system by last week’s collapse of mid-sized lender Master Bank are deep-rooted, but in contrast with banking failures of the past there was no evidence this time of other banks’ customers taking fright.
Which might seem surprising, as the collapse has highlighted the difficulty of enforcing regulations against banks with strong political connections, and the widespread use of illegal payments to service Russia’s large black economy, analysts said.
“Other banks are in the same situation as Master Bank, that’s for sure,” said Alexander Lebedev, the media tycoon and banker.
“Whether the central bank will have enough guts (to act) — let’s wait and see.”
The central bank withdrew the licence of Master Bank on Wednesday, citing “large-scale dubious operations” and causing payment difficulties for clients and some other banks that used it to process card transactions.
“We don’t see any rise in the rates on the interbank market or on the government bond market, so it’s a very local event,” said Maxim Osadchy, head analyst at BKF bank in Moscow.
The bank ranked as the 72nd largest lender by assets in a country which has more than 900 banks, but most are tiny. Even the size of Master Bank’s operations for processing card payments, around $1.5bn a month, was relatively small, in a sector with assets totalling $1.7 trillion.
“Compared with the size of the banking system it is of course kopecks,” Osadchy said.
The relative calm that followed Master Bank’s failure also reflects changes in the regulation of the sector and public confidence in recent years, said Richard Hainsworth, head of local ratings agency RusRating.
He drew a distinction with banking crises in 1998, the year of Russia’s cataclysmic financial crash, and 2004, when the failure of a small bank called Sodbiznesbank provoked deposit runs.
Since then the government has helped calm nerves with state-backed deposit insurance under which the government guarantees up to 700,000 roubles ($21,200) for each saver.
“In 1998 there were fisticuffs outside the doors of banks,” he said. “That doesn’t happen any more because people are confident they’ll get their money back.”
Hainsworth saw a greater similarity with International Industrial Bank, a mid-sized bank that folded in 2010 after a long period of speculation about its shaky finances.
“In both cases, the senior managers and owners of the bank had very strong connections with the political elite,” he said.
“It wasn’t that (Sergei) Ignatyev, the previous head of the central bank, was powerless. But he was constrained by the political conditions in which he was working.”
Reuters
