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. Last Updated: 07/27/2016

KMB Tops List of Foreign Retail Banks

Lingering memories of pyramid schemes and the 1998 financial crisis have made most people exclude banks as places to put their money, preferring instead to keep it under their mattresses. But as the economy continues to grow, bringing wages along with it, there may not be enough mattress space to keep the public's growing cache of dollars.

So where should Russians keep their savings? In any developed country, the answer is obvious: a bank. But for Russians, it's not so simple.

"After the collapse of SBS-Agro, MOST-Bank and Inkombank, which had huge retail networks ... we don't recommend Russian consumers put their money in local banks," said Dmitry Yanin, executive vice president of the independent consumer-rights group Konfop, which recently completed a ranking of foreign banks offering retails services in Moscow.

Konfop, which operates in six CIS states and is a member of Consumers International, a federation of consumer-advocacy groups, sent a representative to nine fully foreign-owned banks to open a savings account.

The depositor did not know the nationality or the specialization of the banks and was unaware of their position on the market, Konfop said.

The banks were rated according to three main criteria: economic attractiveness, including interest rates and minimal deposit requirements; transparency and helpfulness of staff; and other factors like availability of information and its presence on the Internet.

At first glance, the results were surprising. But experts and executives said the research is unique and based on information open to the public.

The highest score was given to KMB-Bank, which since 1998 has been the European Bank for Reconstruction and Development's main channel for lending to small- and medium-sized enterprises.

Turkey's GarantiBank and Finansbank shared second and third place respectively, while Austria's Raiffeisenbank placed fourth.

"We were not surprised that our bank is No. 1 for depositing in terms of economic attractiveness," said a KMB-Bank representative. "At the same time, it was a pleasant surprise for us to find out that we also had a high score for retail service because we do not consider that a priority."

KMB began working with retail customers only recently but is looking to increase its activity. The bank has attracted roughly 1,000 new depositors in the last few months, KMB said, bringing its total number of retail customers to more than 8,000.

GarantiBank, too, was surprised by its rating.

"As we have only one branch, we can't claim to be active in the retail sector," said Maria Mishakova, head of the financial institutions department at the bank's Moscow office. "Yet we don't have anything against Russians who want to put money in our bank."

As of Jan. 1, GarantiBank had roughly $4 million in 180 retail deposits, with the average account around $22,000.

The major advantages of KMB and GarantiBank, Konfop said, were their low minimum-deposit requirements: KMB-Bank requires a minimum deposit of $100 or 100 euros, while GarantiBank's is $1,000. The lack of a minimum-balance requirement and high interest rates were contributing factors, Konfop said.

Konfop cited high minimum deposits ($5,000 or the euro equivalent), strict requirements for opening a deposit (tax declaration) and low interest rates as drawbacks for Raiffeisenbank, a leader in retailer services among foreign banks, with more than $153 million in deposits at five branches in Moscow and one in St. Petersburg.

Raiffeisenbank sets its interest rates in accordance with the London Interbank Offer rate, or LIBOR, said the bank's board chairman Michel Perhirin. LIBOR, or the rate most creditworthy banks charge each other for loans, is currently around 3 percent annually.

The bank pays 3 percent on dollar deposits ranging from $5,000 to $49,000 or 2 percent for the same amounts in euros -- some of the lowest rates on the entire retail market.

KMB-Bank, on the other hand, is offering 5 percent in interest for dollar deposits of the same size and 4.5 percent for euros, while GarantiBank is offering 4 percent and 3.25 percent, respectively.

Raiffeisenbank says its high minimum deposit requirement is not a disadvantage because the bank targets wealthy clients.

Konfop had harsher criticism for International Moscow Bank -- another industry leader with 24, 000 depositors as of Jan. 1, 2002. The bank took eighth place, losing points for its overworked staff and the lack of a web site.

"The staff was very polite, but also very busy, so we could not get any information even after two hours of waiting," Konfop said.

IMB is planning to launch a web site in two weeks, said spokesman Sergei Levskoi, adding that small banks can often service clients faster because of quicker decision making.

Elos Bank gave deposit information in only one language: Chinese. As of Oct. 1, the bank had attracted $20 million, mainly from Chinese clients.

"In general, most foreign banks are not interested in Russian retail customers," said Kim Iskyan, an analyst with Renaissance Capital. "It does not make economic sense for them to fight for $300 from a local babushka. They are rather interested in high net-worth private customers with full balances."

Some foreign banks aren't interested in Russian depositors at all.

"Russians are generally very naive toward banks since they just don't trust any," Iskyan said.

"Maybe one reason is that in Russia, the notion of a banking market appeared only 10 years ago. And not so much time has passed since all the scandals with the MMM [pyramid scheme] and 1998 crises, which took away a lot of people's savings."

Iskyan said that a more important question is when Russians will start trusting banks.

"For now, it is true that the average Russian consumer does not trust either Russian or foreign banks and makes his decisions based on emotional judgements," IMB's Levskoi said.

"But in the end, when the market develops, the origin [of the bank] won't matter, and people will make decisions based on the quality of services."

Ratings for Foreign Retail Banks

Bank Total Score Economic Attractiveness Transparency and Staff Other Factors
KMB-Bank 4.9 55 4.5
GarantiBank 3.744 2.5
Finansbank 4.5
Raiffeisenbank 3.22 53.5
First Czech-Russian2.73.52.5 1
Bank of China (Elos) 2.452.53 1.5
Yapy-Credit 1.11 1 1.5
IMB 2 22 2
Michinoku 1.11 1 1.5
Source: Konfop