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. Last Updated: 07/27/2016

Foreigners Seek to Fill Banking Void




The first major foreign bank since the Aug. 17 economic collapse has received a license to operate in Russia as foreigners seek to fill the void created by the demise of dozens of Russian banks.


On Monday, the Central Bank granted a general license to Commerzbank Eurasija, a wholly-owned subsidiary of Germany's Commerzbank. This follows the registration of a Russian subsidiary of another big foreign bank, Japan's Michinoku, earlier this month.


Michinoku expects to get its general license by the end of this year. So does Germany's Bayerische Hypovereinsbank, which filed its application in 1998.


"The positions of the major Russian banks, which were monopolizing much of the market for servicing major Western and Russian clients, are very weak now," said Andrei Ivanov, a banking analyst with Troika Dialog. "Foreign banks have a good opportunity to get a share of the market now."


Neither of the two new foreign-owned banks intends to go in for retail operations, concentrating on foreign and Russian corporate clients with a serious international turnover.


Commerzbank, with an equity capital of 300 million rubles and a staff of 50, will focus on international payments, foreign trade financing and foreign exchange trading, said the bank's manager Jurgen Frenschkowski.


Commerzbank first applied for the license more than a year ago and considered withdrawing the application when the Aug. 17 crisis hit, Frenschkowski said. In the end, the German bank decided to go ahead and get the license, modifying the list of planned operations.


Commerzbank dropped plans to engage in equity and government bond trading, deciding instead to concentrate on international transfers and consulting.


"It is a very difficult situation and we will be very careful in what we are doing," Frenschkowski said.


The Central Bank and Yevgeny Primakov's government have recently gone out of their way to make it clear they would welcome more foreign banks to the Russian market. Russian law sets a 12 percent cap on foreign participation in the Russian banking system's total capital, but that quota is now far from being filled, according to the Central Bank.


Commerzbank became the 14th foreign-owned bank to receive a general license in Russia. Theoretically, a bank with a general license has the right to open retail branches and serve private individuals. No foreign bank has done that in Russia so far, with the most retail-oriented of them confining themselves to servicing corporate clients' payrolls.


Most of the foreign banks that operate on the Russian market want to see some signs of economic recovery before further expanding into the retail sector.


"[German banks] still see a strategic market here in Russia and they want to become a player - maybe not as big a player as they sought to be before, but Russia might recover and in the medium term or in the long term become an interesting market again," said Andreas Meissner, first secretary with the German Embassy's economic section.