FITCH EVALUATED RUSSIAN BANKING SECTOR
Fitch published a review of systemic risks of banking systems of 81 countries. Russia was included in the group with the highest potential risks. Analysts of the agency explain the Russian banking sector “is subject to potential systemic stress” due to a high speed of growth in prices of shares, real estate, real efficient rouble exchange rate and excessively high ratio of credits to private sector to the GDP.
The research of the systemic banking risks done by Fitch is based on two parameters. The banking systemic indicator is based on the quality received from individual ratings of banks in the last three years and the macro prudential indicator is based on macroeconomic parameters of the state. As a result, Russia was included in the group with the highest potential systemic risks together with Azerbaijan, Iceland, Ireland and South African Republic. According to analysts of Fitch, this means a “potentially more problematic situations in case of external pressure on the banking system.” Representatives of the agency also say that additional risks for the banking system appear if the speed of growth in credits issued to the private sector exceeds 15% on average in the last two years. According to the authors of the research, in Russia this parameter will amount to 24% in 2006.
A similar research done by Fitch a year ago placed the Russian banking system in the second group of risks (MPI 2) according to the macro prudential indicator. Now Russia fell one notch according to this parameter to MPI 3. Analyst of Fitch James Watson explains that parameters of the banking system are low also because “Russian banks are still relatively weak according to international standards without taking into account potential support on the part of the state or shareholders.”
Along with this, Russian experts and bankers got acquainted with the research and did not draw a conclusion about existence of any hazard for the banking system. Mikhail Matovnikov, head of Interfax economic analysis center comments, “We cannot say that conclusions drawn by Fitch for Russia are revelations for the market. All aforementioned facts have already been mentioned by other analysts for a few years in succession. Agencies release such reports primarily for their clients who know very little about the situation in the Russian banking system in general.”
Analyst Stanislav Kleshchev of the investment department of VTB-24 presumes that conclusions of Fitch are sufficiently subjective. Kleshchev adds, “To date, the broad public does not know the names of shareholders of the majority of Russian private banks. Most likely, this very fact served as the criteria for low evaluation of their potential actions in case of crisis.” In turn, senior analyst of Alfa-bank Natalia Orlova presumes that “formally it was possible to recognize readiness of the central Bank to offer the maximum assistance to Russian banks in case of decrease in liquidity.”
Specialists also did not support the statement about risks of excessive growth in crediting. Matovnikov announced, “There are risks and they are getting accumulated but I cannot agree that this happens due to a high ratio of the volume of credits to the private sector to the GDP. This ratio is low in Russia and there is a huge potential for growth.”
The Central Bank did not see any reasons for alarm either. Senior Deputy Chair of the Central Bank Andrei Kozlov read the research and “did not find anything there manifesting worsening of the situation in the banking sector.” According to Kozlov, “Rapid development is a normal process because the Russian banking system is obviously underdeveloped in comparison to demand for banking services.” As for the need to minimize the risks appearing in the process of development, Kozlov believes that “this issue is controllable.”
<ref>Kommersant, September 07, 2006; newsru.com, September 07, 2006
RUSSIA IS READY TO GIVE UP NEGOTIATIONS ON ENTRANCE INTO WTO
Russia has decided not to wait for the moment when the US implements its threat to block Russia’s entrance into WTO. On September 5, Igor Shuvalov, aide to the President of Russia, hinted unambiguously that Russia could freeze the negotiations actually indefinitely. Shuvalov stated that the parties exhausted all limits of concessions and further bargaining was inappropriate.
Shuvalov’s statement was simultaneously expected and sensational. After the failure of negotiations at the G8 summit in St. Petersburg in July, the parties decided to take a break having promised to settle all key disputes by October 2006, the main of them being veterinary control over supplies of American meat to which American negotiators objected.
In August, the already nervous course of negotiations was broken by Economic Development and Trade Minister German Gref. He sent a letter to the American party where he warned the partners that in case of unsuccessful outcome of the next round of bilateral negotiations Russia may give up the previously undertaken obligations regarding all kinds of supplies of agricultural products from the US. First of all, Gref meant the quotas for meat supplies. The response of the US was quick. American party promised that in case of refusal of Russia to fulfill the earlier obligations it would actually block negotiations on Russia’s entrance into the WTO.
The problems evidently moved to the stage of problem impossible to solve and on September 5, the Presidential Administration outlined the stance of Russia. Shuvalov announced, “I understand that we have most likely reached the extreme point and we cannot make concessions anymore in any lines. It will be very difficult for us from the domestic policy standpoint to surrender our positions.” According to Shuvalov, further concession to the US may result in internal political problems for Russia.
The tone of the official of the Presidential Administration may seem excessively harsh only at first glance. Putin hinted that Russia did not pursue the goal of entrance into the WTO by any means anymore back in early August. Exchange of letters of the relevant ministries with the deliberately unrealistic demands could mean a wish to resolve the stalemate situation with the smallest losses for the country’s image. However, experts express other versions too. Iosif Diskin, co-chair of the National Strategy Council, presumes, “Shuvalov’s statement meant that some new demands appeared, otherwise he would not release such statements. Shuvalov is an extremely cautious person not inclined to demonstrative steps. If he has released such statement this means that chances for achievement of an agreement are almost exhausted.” Diskin did not rule out that US Administration hinted that there could be no decisions before elections to the Congress. Diskin predicts, “Russia will evidently abolish all privileges granted to the US on account of future entrance into the WTO.”
Konstantin Zatulin, Director of the Institute of the CIS countries, comments in a harsher way, “Lately, participants of the negotiation process for entrance of Russia into the WTO started viewing our country as an object for blackmailing. WTO is beneficial not only for us but also for the acting WTO members partially due to our energy resources and the sales market for agricultural products.” According to Zatulin, demands on Russia exceeded sensible limits. He is indignant, “Not a single acting member of WTO had to pass through so many approvals and to fulfill so many demands.”
<ref>Biznes, September 06, 2006; Kommersant, September 06, 2006
