Issue price – Newspaper Kommersant No. 196 (7397) dated 10/21/2022
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The proposal of Deputy Finance Minister Alexei Moiseev to increase the number of banking market participants to reduce sanctions risks, made in early October, is quite fair. The consolidated market is an easy target. An extensive network of small players can evade sanctions strikes longer and more effectively.
However, this task will not be easy to solve. The process of consolidation of the banking market has been going on for at least 15 years. Since mid-2014 alone, the number of regional banks in the Russian market has decreased by 2.5 times – from 381 to 148. The Association of Russian Banks in 2021 noted that in 86% of the constituent entities of the Russian Federation either there are no own credit institutions at all, or their presence is minimal.
The main beneficiaries of the process were federal players who methodically bought up small and regional banks of good quality. As a result, the number of branches and subdivisions of large banks grew in the regions, while the number of local participants was constantly decreasing. This was greatly facilitated by the factor of “tired owners”, especially in recent years. The banking business has become too expensive – the volume of necessary investments has increased many times over both in maintaining capital and in the development of technological infrastructure. Those who got used to good profitability in the 2000s could not accept the new reality: it turned out to be easier for them to pass the license than to try to play by the new rules.
And the rules still haven’t changed. And where, then, to find new – not “tired” – owners who will be engaged in the development of new niches in the regional banking business? This is a big question. The process of creating a new bank, obtaining a license is painful and complicated. High overregulation and low marginality of the banking business do not attract entrepreneurs.
One way out could be the initiative of local administrations. Moreover, their direct participation in capital and management is a bad idea. This experience has already been in the history of the market, but most of these banks eventually ceased to exist. Basically – due to weak risk management and problems with financing affiliated structures. But there is another way. For example, to create and maintain (at the level of guarantees and guarantees) a pool of local merchants who could take on such a task.
At the same time, there are already banks that have long been working with niches that are unusual for a large federal market – with alternative currencies (yuan, won, etc.), settlements with participants in international trade from Asia, Africa, and the Middle East. These are small local players in the Trans-Urals – Siberia, the Far East. They occupy a natural market niche based on geography. This is now becoming a real competitive advantage. Unlike the “federals”, which are focused on the largest enterprises and usually work “through Moscow”, they can provide assistance in settlements to small and medium-sized regional businesses.
With this in mind, it may be worth focusing not on creating specialized structures from scratch, but on maintaining what already exists. To help those small regional players who have already learned how to work in the realities of the “pivot to the East” survive: give a little more freedom in terms of regulation and share best practices. Which is just rich in large federal banks that have fallen under sanctions.
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