INTERVIEW: Cbank backs idea to ban state banks from buying other banks
MOSCOW, Jan 25 (PRIME) -- Russia’s central bank has supported the idea of the Federal Antimonopoly Service to prohibit state banks from buying other banks or blocking stakes in them, but exceptions are possible, the service’s Deputy Director Andrei Kashevarov told PRIME in an interview released on Thursday.
In September 2017, Kashevarov said that the service was going to send several proposals to the central bank aimed at improvement of competition in the banking sector, including a proposal to prohibit state banks from buying other banking assets.
“We have sent it to the central bank. Moreover, we have already received an answer. In general, the regulator supports our goals, and we’ve received a corresponding answer signed by Central Bank First Deputy Chairman Dmitry Tulin,” he said.
The service suggests prohibiting the government and affiliated companies, including state banks, from buying blocking stakes in other banks. “This is how we want to create conditions for contraction of state ownership growth in the banking sector that we’ve seen recently, and we want state banks to develop not mainly through acquisition of competitors,” he said.
But there may be exceptions. “In this case, an exception may be made for bankruptcy prevention procedures that are now envisaged, and to ensure accessibility of banking services on the territories that need them…The Bank of Russia also suggested we work out the possibility of raising state ownership in banks if there are unfavorable external or internal factors that create threats for stability in the banking sphere connected to the security issues,” he said.
The service sees worsening banking competition. Last year it analyzed the market situation from 2011 through mid-2017. “Calculations showed that competition in the banking system has been worsening and a trend of growing of large state banks’ market share, both on the federal and on the regional levels, is becoming more and more apparent,” he said.
Other market players are often unable to compete with them. “At the same time, the majority of regional markets are highly concentrated, I mean they are in a state when there is a dominating player and the competition level is low. Now there are almost no markets in the regions where we can see a high level of competition,” Kashevarov said.
The government has to reduce state ownership in top bank Sberbank from 50% plus one share – owned by the central bank – and in the second largest bank VTB from 60.935% – owned by the Federal State Property Management Agency.
“I think we have to cut the stake of the state in them. The possible way here is to couple it with construction of a system to ensure stability of the banking system. After that we will be able to speak about privatization, when the process is understandable taking into account new ways developed by the central bank, and when we see that the mechanism may work,” he said.
The anti-Russian sanctions are only relatively harmful here. “In this case, the sanctions are a symbolic factor. The issue is whether we have money to hold (initial public offering, IPO) or not. The estimate for floation here is global and the obstacle is only the presence of money and the capability of investors to buy the offered shares,” he said.
The antitrust is very unlikely to allow VTB Bank to buy Bank Otkritie Financial Corporation, which is undergoing a bailout through the fund for consolidation of the banking sector, he said.
He thinks that the regulator should sell bailed out banks through the fund – Bank Otkritie, B&N Bank, and Promsvyazbank – separately. “Because the amount of assets of these banks is not small, and it would be better to sell them separately in order to find buyers at a fair price. If they sell it in a wholesale deal, the price will be lower, and it would be more difficult for private investors to find money,” he said.
The service also wants to prohibit investment consultants from making public predictions about problems in banks, as it leads to runs on banks and worsens their chances for survival in case of problems.
In August 2017, Alfa Capital analyst Sergei Gavrilov warned clients about problems at Bank Otkritie Financial Corporation, B&N Bank, Promsvyazbank, and Credit Bank of Moscow.
“One should not take over functions of a regulator. When information is disseminated not by a regulator, but by, let’s say, an investment consultant, it slashes the chances of a bank for survival even if the information is valid. If the regulator does not recall the license, if the regulator does not stop this or that banking operation …there is still a chance,” Kashevarov said.
“But when an individual speaks, I mean a company where an individual works, wild panic emerges and capital outflows happen. No one objects to public announcements about people should do with shares. Holding shares is a positive factor, so nothing bad is happening. Purchases of shares mean that a bank is growing. Sales of shares look like a call to take profits as profits are high now. There are positive aspects in all three recommendations,” he said.
The service is ready to discuss “the rules of the game” and develop standards of investment consulting, he added.