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. Last Updated: 07/27/2016

Four Banks Complete Loan Terms To Upgrade

Four Russian banks have finalized terms for loans to upgrade their business practices and bottom lines, becoming the first winners of credit and an international seal of approval from the World Bank and the European Bank for Reconstruction and Development.

Stolichny Bank, St. Petersburg Bank, Promstroibank of St. Petersburg and Uralpromstroibank have recently signed agreements with the Russian government allowing them to tap into $300 million in Western loans for the development of the country's banking sector, officials said Thursday.

"The idea is that these banks are deemed to be acceptable for additional work by ourselves, in particular, and by the World Bank," said Lou Naumovski, chief of the EBRD's Moscow office.

The Financial Institutions Development Project, launched in 1993, is aimed at developing a nationwide core of 40 to 45 Russian banks whose investments can drive the country's economic recovery.

"You don't only need macroeconomic stability to ensure that domestic capital is being formed," explained Lou Naumovski, chief of the EBRD's Moscow office. "You also need the technical knowledge and the experience to use that capital wisely."

Hasso Molineus, chief of operations at the World Bank mission in Moscow, said he was pleased the first group of banks had "finally" signed their agreements with the Finance Ministry to allow the international loans to go ahead.

"This is only the beginning of a series of potential follow-up projects to create a good solid core of healthy banks which would become the backbone of the Russian financial system," Molineus said.

The loans are intended especially for the purchase of computer equipment, technical development and other processes to ensure wise use of the banks' resources, Naumovski said.

Agreements also are expected to be concluded soon with Tokobank and Mosbusinessbank, and Naumovski has said he expects at least 18 institutions -- recommended by the EBRD and World Bank last fall -- to qualify for the loans by the end of the year.

The $100 million from the EBRD and $200 million from the World Bank is made available to the Russian government, which then concludes subsidiary agreements with domestic banks with its own legal and financial terms.

An additional several hundred million dollars for direct enterprise lending is also in the works once the FIDP program is in place, Naumovski said.

"It's the first time the World Bank and the European Bank decided that the [Russian] banks are mature enough" to receive international credit, said Nina Petrova, a spokeswoman for Stolichny. "It's a great kind of recognition."

To qualify for the FIDP loans, banks must undergo a rigorous Western-style audit and demonstrate minimum levels of transparency, efficiency, capitalization and the like. The loans themselves are then used to build on those strengths and remedy identified weaknesses.