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25 Nov, 2008 04:14

Regional banks feel the squeeze

Russia’s regional banks are sending an SOS after failing to get access to State money. They are urging the Central bank to give them credits backed by their real estate. But market watchers say a massive acquisition of regional banks is unavoidable.

Crisis is regarded by many as a time of opportunity, especially for large Russian banks eyeing their regional rivals.  The small banks are struggling to refinance, and are forced to look for investors.

Credits from the Central Bank and the government are available only to banks with international ratings, and those who get the money are reluctant to take risks with unpredictable regional banks, according to Anatoly Aksakov, from the State Duma committee on financial markets.

“Actions taken by financial authorities were inappropriate in terms of competition. The government created more favorable conditions for federal banks. Regional banks were simply cut off from the sources of refinancing provided by the state and the Central bank.”

So far three regional banks are up for sale. But Garegin Tosunyan, Head of the Association of Russian Banks, says the number of financial institutions in Russia will fall by at least 10 percent.  He also says that even banks that are well funded suffer from excessive state attention.

“For small regional banks, risks are higher due to our mentality that everything that is small is bad. I don’t support that. I believe if you found your segment, then just work normally, and the government should leave you alone. Banks would not be afraid that tomorrow they might have problems from the regulator who considers them as unstable due to their size.”

The Government says it’s hard to estimate the risks of regional banks as they are not transparent enough. And it repeatedly points out that the fewer banks – the better.

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