Magazine article American Banker

Russian Bankers Take Home Lessons from U.S

Magazine article American Banker

Russian Bankers Take Home Lessons from U.S

Article excerpt

Most consumers in the former Soviet Union still save money the old-fashioned way -- in their mattresses -- but financial institutions there actually have an edge over U.S. banks in one area: payments.

"In Russia there are no checks -- only cash and debit cards," said Alexandre Zaozerski, the vice chairman of Viking Bank, a small commercial bank in St. Petersburg.

Mr. Zaozerski was one of 20 bankers from Russia, Ukraine, and Kazakhstan to come to New York last month for a crash course in the U.S. banking system. "In this case, we are ahead of even American banks," he said. "It's easier for us to convert to debit, because we have no other currency."

The visitors, who sat through training sessions followed by two-week internships, said they were going home with new ideas on how to improve and expand their admittedly tenuous banking infrastructure.

The lessons they learned here will need to be adapted to vastly different circumstances at home. "It's impossible just to copy something to Russia," Mr. Zaozerski said. The absence of credit bureaus is "a real problem," as are the facts that only 2% of Russians consider themselves in the middle class, and that "the very rich don't need to borrow."

As a result, "it's very difficult to deal with the consumer side," he said.

Banks there have yet to overcome the conceptual hurdle of sharing customer data with one another, a prerequisite to establishing a common credit bureau system, Mr. Zaozerski said. The Russian Bankers Association has had "some success" in gathering negative consumer information, but it is basically a blacklist, he said. "It would obviously be better" for the banks "to cooperate" in gathering data.

The monthlong program, sprinkled with Broadway shows and cocktail parties, included presentations by bankers from Citigroup Inc., J.P. Morgan Chase & Co., and Bank of America Corp. Training topics included money laundering, risk management, and product development.

The goal "is not to offer a prescription, but to make our expertise available," said Salvatore Pappalardo, the managing director of the Financial Services Volunteer Corps, a New York-based nonprofit group that organized the program.

Ex-Soviet financial institutions are operating in an unstable economy and struggling to abide by minimum capital requirements. The system is, after all, only 12 years old.

Imperfect as it is, the current infrastructure is still "a big achievement," said Mikhail B. Fomin, a board member of Europrominvest Bank in Moscow and a participant of the U.S. training program.

During an interview in New York a few weeks ago, Mr. Fomin said that his bank, which serves mostly commercial clients, would like to break into the consumer market. However, Russians have different concerns than Americans and different attitudes about their finances, government, and personal information, he said.

"Many Russians don't think about long-term issues," he said. "The last eight decades taught them to think about the current situation only, and to be afraid of any promises of long-term benefits," so an American-style pitch to open a retirement account, for example, will not get far without significant confidence-building efforts.

A residual distrust in government interferes with consumer confidence in banks, he said. "People are afraid to let out information that will become public," Mr. Fomin said. "They don't understand that the information will help them apply for loans."

Despite the visiting bankers' litany of woes, one of the U.S. bankers who helped train them said they impressed him.

"Here we are trying to get our customers to write less checks, and their customers don't even use them -- We were fascinated by that," said Fred Landiss, a senior vice president and the director of marketing at Farmers & Merchants Bancorp Inc., a $360 million-asset banking company in Clarksville, Tenn. …

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