THE RF PUBLIC CHAMBER COMMISSION ON ECONOMIC DEVELOPMENT AND SUPPORT OF ENTREPRENEURSHIP

The RF Public Chamber hearings ”National financial system: power, openness, sovereignty”

April, 16th, 2008

On April 16, 2008 the RF Public Chamber held hearings “National financial system: power, openness, sovereignty”. The hearings were held by the Public Chamber commission on economic development and support of entrepreneurship. Participants were presented with a report “Russian financial system potential development” in line with a mutual project of the Rossyia Association of regional banks and the Expert RA rating agency.

According to the authors of the report, the Russian financial system is still pretty weak, inadequate for current economic demands and can not claim to play an outstanding role in the world. Besides, the current growth is accompanied by two processes: state involvement in the financial system and active penetration of foreign capital (for example, only in 2007 share of non-residents in the banking capital increased from 15.9% to 25.1%; Russian financial structures are literally stand in line to be sold). The country needs a financial system in line with the scope of its economy, capable of securing economic sovereignty and competitive advantage at the international arena. The economy should ensure social stability and support speedy economic development.

According to Gleb Fetisov, first deputy chairman of the committee on financial markets and monetary circulation in the Federation Council, you should be very cautious about appearance of foreign capital at the Russian market. The state financial system is not a “pass-through yard” – the state requires a top-level clear development strategy.

Anatoly Aksakov, president of the Rossyia Association of regional banks and the State Duma deputy, said: the population coverage with financial services is extremely low: long-term bank deposits and consumer credits are used by 20%-25% of the population, less than 2% have used mortgage credits, purchased mutual fund units and made transactions with securities. The markers are indicative of low financial activity and literacy of the population as well as underdevelopment of the financial sector.

Oleg Solntsev, ЦМАКП leading expert, attracted attention to the bank capital high dispersion. Over 80 % of banks are incapable of giving credits in excess of 10 mln dollars, which disallows Russian banks accumulating resources to finance large-scale projects. At the same time lack of internal sources of capitalization in the banking sector destabilizes the bank capital adequacy and increases vulnerability and risks.

“There are three basic tasks for the financial system to resolve, – said Dmitry Grishankov, Expert RA general director. – First, a powerful source of long and cheap investments is required. Second: the financial system needs efficiency to secure transformation of internal savings into investments with minimum transaction costs and to sponsor effective allocation of resources in the economy. Third, the financial sector should foster implementation of the state social function.

The report authors underscore three main groups of resources to ensure the financial system’s efficient growth. First - funds of the population and private sector, second - funds of the state, special foundations and quasi-state structures, third - undercapitalized assets.

Vladimir Milovodov, head of FSFM, said the report proposals for different markets should be consolidated. “Our service has prepared the stock market development concept. We are ready to participate in elaboration of proposals to develop our financial system”.

The Expert RA rating agency and the Rossyia Association of regional banks, supported by the RF Public Chamber, will continue elaborating “Concept of the financial market development till 2020” considering all incoming proposals, on the basis of working meetings and discussions with the professional community.