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The First Stage of the Insurance System

The first stage of enlistment of banks in the deposit insurance system has been completed and the results are in from the first quarter of the system's operations: 97.7 percent of all deposits are in member banks. The majority of banks that have not been included in the system hope to be soon. But it is still not clear whether the deposit insurance system will be a real alternative to Sberbank.

The first 26 banks were accepted into the deposit insurance system at the end of September of last year. The most notable changes in the ratings since then has been the increase in the assets of MDM Bank by almost 50 percent and a decrease of approximately the same magnitude at Khanty-Mansi Bank. Citibank also showed a surprising 20 percent drop in its capital, which they attribute to the purchase of the depositary business from ABN AMRO. Sberbank's investments in securities also dropped somewhat. As a result, investments in securities by the whole banking system were the only indicator that fell in the quarter.

Because of its size, Sberbank pulls the entire banking system down in a number of indicators. The amount of capital in the banking system grew by 6.8 percent without Sberbank, but only 5.8 percent with it. Assets grew by 12.6 percent without it, as opposed to 10.4 percent with it, and obligations grew by 14.2 percent without it, 11.6 percent with it. Even deposits grew by 16.5 percent with out it and 9.4 percent with it being taken into account.

It is premature to say that Sberbank's position is slipping, although it can be noted that its share of all deposits on the market fell from 62.7 percent to 60.4 percent. The full state guarantee on deposits in Sberbank is good only on those made before October 1 of last year and at the end of September they began insuring other banks. There were 1.95 trillion rubles deposited in Russian banks as of January 1, 2005, and 97.7 percent of that amount is now under insurance. But, according to Alexander Turbanov, general director of the Deposit Insurance Agency, only 25 percent of that amount is covered under the system. The rest of it is in accounts that exceed 100,000 rubles.

Of the 200 largest banks by capital, all except 53 of them are now insured. The reasons for not being insured are many. One group of uninsured banks is those that have only recently been registered. A bank that has been on the market for less than tow years cannot work with individuals. Another category are banks that specialize in mortgage crediting. First deputy general director of the Moscow Mortgage Agency Bank Andrey Belyakov said that his bank did not apply for deposit insurance because it was unnecessary. “Our bank works with individuals through loan accounts. We don't even have a license to accept deposits,” he said. Central Bank officials say that that position is somewhat mistaken, however, and a bank should be a member of the system to work with individual clients in any capacity.

A number of banks still expect to be accepted into the insurance system when they meet the Central Bank's requirements. Dmitry Klushin, chairman of the board of Vis-a-Vis Bank, said that the Central bank's evaluation of the risks of some of the credits granted by the bank differs from the opinion of the bank. The Central Bank noted in a press release on the topic of the completion of the first stage of the deposit insurance system that “many banks have taken a new look at the processes of management, risk management and internal control.”

The Most Profitable Banks in Russia >>

All the Least Profitable Banks in Russia >>

The 100 Main Retail Banks that Entered the Insurance System in the First Stage >>

200 Largest Banks in Russia by Size of Capital >>

200 Largest banks in Russia by Net Assets >>

The Biggest Stakeholders in the Banks for January 1, 2005 >>

by Maxim Builov, Daniil Zhelobanov, Kirill Yacheistov

All the Article in Russian as of Apr. 04, 2005

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