Russian Banking System – the Current State and the Prospects for the Future Developments

The Phases of the Russian Banking System Developments The Structure of the Financial Flows in the Russian Economy The Prospects of the National Banking System Developments

The Phases of the Russian Banking System Developments in the Transition Period 1. The Appearance of the Russian Banking System in the Transition Period (1988-1998) 2. The Recovery of the Russian Banking System After the System Financial Crises in August 1998 (September 1998 -2002) 3. The Current State and the Prospects for the Future Developments of the National Banking System (2003 - 2006)

The Scenarios of the Banking System Recovery in the Post-Crisis Period The Government Support The Foreign Capital Invasion Using Own Activity and Own Capital

Russia’s Banking System Key Indicators (as on the beginning of the period, in USD according to the market exchange rates) Year Assets Charter Capital Own Capital Enterprises' Loans 1998 112,2 7,7 20,4 34,0 1999 45,9 3,0 5,2 14,5 2000 53,7 5,3 7,1 16,8 2001 76,7 7,5 10,4 27,5 2002 95,7 9,0 15,0 39,8 2003 120,2 10,0 18,3 50,8

Current Trends in Banking System Fall of the Profitability Shortage of the Financial Instruments Increase of the External Credits Increase of the Market Risks

The Net Financial Flows Between Russians Banks and Economic Agents as on 01.01.1998 (%GDP)

The Net Financial Flows Between Russians Banks and Economic Agents as on 01.01.2004 (%GDP)

Net Financial Flows (% GDP) 01.98 01.99 01.00 01.01 01.02 01.03 01.04 Commercial Banks -2,97 -2,60 -0,97 -1,90 -1,62 -1,30 -1,15 CBR 2,23 1,87 2,54 3,54 2,86 3,78 4,95 Government 7,15 6,44 3,92 3,34 2,93 3,00 2,73 Regions 0,60 0,52 0,09 -0,28 -0,23 0,08 0,28 Enterprises 2,24 1,01 -1,83 -1,46 1,09 1,84 3,63 Households -7,58 -7,13 -5,77 -5,61 -6,72 -8,38 -9,37 Non-Residents -1,67 -0,12 2,03 2,36 1,68 0,97 -1,06

Banking Classification - The State’s Control Banks - Private Banks - Foreign Banks

State Control Banks Households’ Deposits Foreign Loans Credits to the Real Sector Financial Markets

Private Banks High Cost of the Liabilities Low Capitalization Low Credit Ratings High Risk of the Assets

Foreign Banks Cheap Deposits Access to the Foreign Loans Good Financial Results

The Financial Results of the Selected Banks on the Russian Market 2002 2003 Profit/Capital Profit/Capital Domestic Banks Industrial Construction Bank 45,5% 39,4% Sberbank of RF* 30,2% 26,7% Gazprombank* 13,2% 19,6% Moscow Bank 10,2% 18,0% Vneshtorgbank of RF* 22,1% 17,9% Rosbank 16,5% 9,6% MDM-bank 1,7% 7,5% Alfabank 1,6% 1,3% Foreign Banks Raiffeisenbank 49,4% 66,7% Commerzbank (Eurasia) 33,6% 65,5% International Moscow Bank 31,5% 52,8% ABN AMRO (Eurasia) 48,0% 36,0% Citibank 39,6% 31,0% CSFB 36,1% 21,8%

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