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. Last Updated: 07/27/2016

Chubais Tells Banks to Invest in Industry

Russia's top economic reformer in government, First Deputy Prime Minister Anatoly Chubais, urged commercial banks to invest in industry, but met a skeptical reception from executives unconvinced about the extent of corporate restructuring and financial stabilization.


"Redistribution of assets from the financial to the industrial sector has started," Chubais told a meeting of the Association of Russian Banks on Wednesday. "Those banks that realize this tendency earlier will be in an advantageous position.


Chubais said the metallurgy, timber and residential construction industries have shown growth of around 10 percent so far in 1995 compared with the previous year, making them promising candidates for long-term investment.


The banking industry representatives, however, seemed more preoccupied with their own problems and did not share Chubais' optimism.


"The banking system is a very severe crisis. I am very pessimistic about the prospects of long-term investments," Yury Agapov, president of Credo Bank, told Kapital.


In the bankers' view, industrial enterprises' cumbersome management and government's erratic tax regimes, together with stricter reserve requirements imposed on banks by the Central Bank, make it difficult and risky to extend loans to industry.


"Industry is the matter: Banks won't provide long-term credits because enterprises work badly," said Vladimir Dzhikovich, chairman of the St. Petersburg Timber Industry Bank board. "Let's wait till autumn, I am not sure that stability will last so long."


The Association of Russian Banks said the share of long-term investments in banks' credit books was only 5 percent. About 600 banks, about one-quarter of the total in the country, suffered losses in 1994, the association said.


ARB Chairman Sergei Yegorov attributed these difficulties to broader economic problems.


"The crisis in the economy induced crisis in finances," he said.


And the weakness of industrial enterprises threatens to bankrupt the lenders, Yegorov said. Debts owed by unprofitable enterprises are as high as 7 trillion rubles ($1.4 billion), he said.


Vladimir Vinogradov, chairman of Inkombank, was more optimistic.


"We can expect 15 to 20 percent growth in some industries," Vinogradov said. "We should plan a two- to three-fold growth of our credits to invest in the developing industries.While the government sought more private-sector industrial investment from the banks, it did not offer much help or sympathy to the banks for their own difficulties.