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. Last Updated: 07/27/2016

Knowledge Gaps Hurts Business

LONDON -- Russians have a poor understanding of financial instruments, which may threaten the stability of the nation's financial system, Nikolai Dobrinov, chairman of the supervisory board at Nomos Bank, said Tuesday.

Studies show "a great share of the population" has a weak understanding of even basic financial instruments, such as mortgages and consumer loans, Dobrinov said in a speech during the Russian Economic Forum in London.

"The ineffective management of personal budgets can create a threat to the stability of the financial system," he said, adding that many Russians are not accustomed to planning ahead to meet financial obligations.

He urged the government and banks to educate Russians about personal financial management to stave off the growth of unpaid consumer loans and boost trust in the banking system.

Russian banking industry assets reached 52.8 percent of gross domestic product in January, as the country continues its run of economic expansion.

Bank loans reached 8.03 trillion rubles ($310 billion) or 30.2 percent of GDP in January, up from 25.2 percent of GDP in the same period last year, Central Bank data show.

Booming consumer demand is spurring the financial system to expand quickly, meaning that "likely short cuts being made on risk systems and liquidity measurement" may surface should the liquidity dry up, Roland Nash, head of research at Renaissance Capital, said in a research note last month.

"Russians are prone to depending on luck," which is a dangerous cultural trait when it comes to meeting loan payments and other financial obligations, Nomos Bank's Dobrinov said.