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. Last Updated: 07/27/2016

Banks Less Opaque, S&P Says

The country's top 30 banks have become slightly more transparent over the last year as they seek to go public and borrow abroad, but they continue to trail top international banks in disclosure and corporate governance, ratings agency Standard & Poor's said Thursday.

"We are significantly below the global peer group," said Julia Kochetygova, the lead author of the S&P report.

While the big state-controlled banks control most of the loans and deposits in the banking system, they trail top private banks such as MDM Bank, Alfa Bank, and Rosbank in transparency and corporate governance, she said.

Sberbank, Vneshtorgbank and Gazprombank -- Russia's three largest banks by assets -- occupy the fifth, sixth and seventh places in the transparency rankings.

Even though it is working toward an initial public offering, Vneshtorgbank, or VTB, dropped from first to fifth place because it didn't increase its transparency as much as other banks in the past year. The Bank of Moscow, controlled by the Moscow city government, dropped to 23 on the S&P list.

In general, the country's top banks have vastly improved in disclosing their often-obscure ownership structures, but some need to work on spelling out the relationships between their clients and their owners, the report said. Also, Russian banks scored extremely low on disclosure of executive compensation, and some were cited for lending to bank officers.

The country's top banks got an average of 48 percent on S&P's transparency scale, 12 percentage points higher than last year. Kocheygova said an increase in 10 percentage points on S&P's transparency scale correlated to a borrowing rate that is one-third of a percentage point -- or 33 basis points -- cheaper in the foreign bond market.

The most transparent Russian bank, MDM Bank, earned a transparency score of 69 percent, not far below Credit Suisse, which was rated at 71 percent.

Alfa Bank rose from 28th to third place on the list, with a score of 65 percent.

"Alfa Bank has always been among the leading Russian banks in disclosing information, which is key to building financial community and clients' trust," the bank said in a written statement.

One of the many factors in the S&P study was the disclosure of material in English in addition to Russian.

"Foreign investors must not be deprived of important information," Kochetygova said.

"No Russian bank even comes close" to the transparency standards of international banks such as HSBC, JP Morgan Chase and Deutsche Bank, Kochetygova said.

The study points to "some improvement but not a general improvement," said Alain Pilloux, head of the European Bank for Reconstruction and Development's Russian business.

Pilloux said the path toward an initial public offering was leading many banks to be more transparent, but pointed out that it was not a "miracle cure."

Becoming more transparent wouldn't be difficult for most of the country's banks, Kochetygova said, because they already send about 100 forms filled with data to the Central Bank on a monthly basis.

"The banks have full freedom to publish these reports on their web sites," Kochetygova said.