Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Moscow's Big Banks Stake Claims in the Provinces

Russia's largest banks, having staked their respective claims in Moscow but still suffering from tight liquidity in the marketplace, have begun moving into the regions, paying particular attention to the lucrative accounts of regional administrations.


Uneximbank concluded its eighth deal with a regional administration last week by penning a far-reaching cooperation agreement with the Perm region in the Urals, including a loan for 70 billion ($14.4 million) to 80 billion rubles, Interfax reported.


But while the potential outside Moscow is huge -- only 25 percent of regional administration accounts lie with the Central Bank, according to the Russian state accounting chamber -- the Central Bank warns against the dangers posed by commercial banks assuming what it views to be government duties.


"Budgetary and nonbudgetary funds are often without reason being transferred to commercial banks that are not sufficiently safe," the Central Bank said in a statement.


Yet the advantages to a region dealing with a Moscow bank are great, considering both the access to capital and the knowhow of the country's top institutions.


"Our bank can grant the administration credits, and thereby help it to solve its social problems, [such as] the problem of unpaid wages," said Modest Kolerov, a spokesman for Uneximbank.


The main objective of a bank entering agreements with the regions is to develop a strategic foothold from which to win lucrative accounts of the regional administrations, analysts said.


"The Moscow market is overcrowded, so the capital's banks look to the regions," said Alexander Zagryadsky of the Association of Russian Banks.


While retail banking is still slow in the provinces, regional budgets have considerable resources at their disposal. Moskovsky Oblast, one region currently being courted by several Moscow banks, has a budget of 8 trillion rubles, Kommersant Daily reported.


And although the Central Bank has demanded that where possible, all central and regional budgetary funds be serviced by state banks, cooperation agreements between Moscow banks and regional administrations are becoming a mass phenomenon.


Uneximbank may be ahead in such important regions as Novosibirsk and Primorsky Krai, but its competitors are not far behind.


Rossiisky Kredit, another of Russia's top 10 banks, also has pursued an aggressive strategy. With 31 branches to date outside Moscow, it has succeeded in establishing close links with several regional administrations.


"In some regions we have encountered fierce resistance. For example, it took us 1 1/2 years to get permission just to open a branch in St. Petersburg," said Dmitry Lyubinin, the central executive officer of Rossiisky Kredit.


Other regional authorities have been more eager to collaborate with Rossiisky Kredit, which currently services budget accounts in the Siberian regions of Magadan and Irkutsk, among others.


"It is a natural process," Lyubinin said of the growing links between the regions and Moscow banks. "In many regions there are simply no stable banks left whatsoever."


The Samara region, home to a string of Russia's leading industrial companies, including carmaker AvtoVaz, is a case in point. After the crisis of Avtovazbank, there are no large regional banks left in the territory along the Volga. Moscow's banks are moving to fill the void.


Early this month, Inkombank President Vladimir Vinogradov visited Samara for talks with the region's governor, Konstantin Titov, concerning a string of major investment projects.


Inkombank is also strongly positioned in northwestern Russia, where it is a main creditor of the St. Petersburg, Arkhangelsk, and Vologda regional administrations.


Good relations with the regional bosses seem to be the gateway to success for Moscow banks in the provinces.


"In the regions, the administrations are among the main players in the sphere of economic policy," said Uneximbank's Kolerov.


In several cases, regional administrations have taken steps to limit the access of outside banks. But Moscow banks have largely met such resistance by acting through regional subsidiaries.


Moscow's giant Menatep bank has been widely reported in the Russian press to have set its sights on the Yekaterinburg region -- the most populous region east of Moscow.


Although the Yekaterinburg legislature passed a law last year prohibiting banks not registered in the region from servicing the administration's accounts, Menatep's acquisition of the large regional institution SKB Bank may allow it to skirt the ban.


In the face of the onslaught of the Moscow banks, most regional bankers have been forced onto the defensive.


"We don't think anyone can compete with us in the Tver region, where we are based," said Pavel Zotov of Tveruniversalbank, the largest Russian bank outside Moscow and St. Petersburg. "But many a regional bank can feel the pinch when one of the large Moscow banks arrives on its turf."





"There will come a time when Inkombank will be [bank] No. 1 -- and not No. 2 or 3 -- in the Samara region and a large part of the Volga area," Vinogradov asserted at the end of the visit, in remarks reported by the newspaper Kommersant Daily.


, some of which are very attractive


Regional banks react in different ways to this challenge "


"They are the ones that shape the financial policies."


and a standardbearer of regional self-determination


whose operations have temporarily been taken over by a Central Bank committee