Heracles of the banking

You hardly find anybody in Russia who would not know Viktor Gheraschenko. Four times he was the head of the Bank of Russia and he still remains the greatest specialist and recognized authority in the banking sphere. People respect him and are afraid of him. He was discharged several times, but later he was asked to this post once and again. The opinion of Viktor Gheraschenko is considered by Russian politicians and leading Western financiers. Especially because the profession of the banker is hereditary, and Viktor Vladimirovich is the banker of the second generation. In spite of his age, his spirit remains young, he is easy to communicate and from time to time he likes to perform unexpected deeds. That is why Russian people follow the development of his career as if they watched the next film of a popular serial. Viktor Gheraschenko had dreamt of a juridical career but during all his young years he resulted in rescuing crediting organizations in Germany and Singapore that were practically doomed. He gave up basketball because of the sight probleme and now he enjoys watching intellectual films made by the leading cinema directors and producers of the planet. In his exclusive interview to the National banking magazine Viktor Gheraschenko gives discourse on the ways of the development of the national banking system and means of its reforming.

Recipes of crisis-proof management

The squall of the bankruptcies of the first corporations that swept over Europe in the 18th century had very few distinctions from the problems generated by modern financial pyramids. Since then there appeared methods to struggle against crisis occurrences – methods that help to avoid the utter ruin and even to maintain the previous level of income. Western recipes of crisis-proof management do not function at the developing markets. The dismissal of one person in Argentina will spare on average 38 000 dollars annually, in Great Britain – up to 129 000 dollars annually. In Europe large scaled dismissals always used to be the most attractive solution. But in developing countries it is not inefficient to dismiss the staff of the banking holdings. In this case one may make salaries decrease at the cost of some productive capacities: e.g., sale of the network of cash dispensers and unprofitable banking branches.

Self-regulated organizations have future

The draft on self-regulated organizations approved by the Governmental Duma in its first reading is still the target for many blames from the part of bankers. Do crediting organizations need self-regulated organizations? Won’t self-regulated organizations duplicate the functions of supervising institutions, in this way changing into quasi-governmental structures?

These problems are discussed in the frames of the hot topic of the June issue of the magazine. Most disputes among Russian bankers arise because of the thesis following which self-regulated organizations will possess supervising commission, will be able to make inspection check-ups and also to make requests about the accounts of the banking activity. Only one Western banking association – in Switzerland – has the rights of self-regulated organization. The main argument opposing the introduction of self-regulated organizations in Russia is the lack of world-wide experience of self-regulated organizations in the banking sphere. At the same time many bankers are aware of the profits of self-regulation.

Northern outpost of the banking society

As for population, Saint-Petersburg takes the third place among European cities. Great national banks, while widening the branch network, test their strength on the territory of North-Western Russia. This region is representative for the Russian banking system: Saint-Petersburg plays the part of the capital and other towns are typical provincial “megacities”.

In general, commercial banks from other regions are active in penetrating into the territory of the North-Western Russia. Last year local crediting organizations lost their gains in the sector of consumer loans. Similar processes take place in all Russian regions. However Valentina Matvienko, the governor, has initiated reformative impulses in different economic spheres. The administration has its favorites – the commercial banks “Saint-Petersburg” and “Promstroybank” that are the part of the Banking-house “Saing-Petersburg” (where Sergey Matvienko, the governor’s son, works). Using the language of political scientists, Saint-Petersburg has got into the phase of the “controlled stability”. Time will show how much it will be favorable for the development of the banking sector of this region.

Ex-banker Michael Oseyevskiy has recently become the vice-governor of the Northern capital. Under his direction the municipal budget has started to issue bonds to cover its deficit; the spare funds are distributed by means of repurchase agreements.

Top-150 of the most profitable banks

In the first quarter of 2004 the profitability of the banking sector has increased. The year-on-year profitability of the assets has been more than 4,5% and the return on capital investment has exceeded 36%. However this increase is caused by the intensive growth of share prices. If the profit margin from the securities’ business had remained at the level of 2003 year, the profitability of the banking sector would have been very low. The year-on-year profitability of the assets would not be more than 0,06% and the return on capital investment – no more than 0,41%.

Square meter price

The growth of real estate prices in Russia that has not stopped in the latest 3 years makes anxious not only analysts but also the government. The authorities’ representatives think it is necessary to take measures that would make possible control over the impetuous growth of the dwelling cost. The growing demand is caused by profiteers who have appeared at the market – they buy apartments with the purpose of making money after selling them. In this connection some analysts expect the decrease in the prices or even their collapse in 2005-2006. But there are other opinions, too. Those witness that there won’t be any collapse of the real estate market, and that its real growth has not even started yet.

Reformers’ expansion

Last year Kazakhstan became the first CIS country that was recognized by the USA government to be the country with the market economy. The reforms carried out by the government, the rise of trust toward the banking sector and, as a consequence, the increase of volumes of the population deposits promoted the strengthening of the financial system and stimulated the economic growth. At the same time further development of the industry and economy of the country will depend much on the variation of world oil prices and political situation in Kazakhstan.

In the opinion of the analysts of Standard & Poor’s, the high centralization of the governmental and official system, the inefficient transparency of the process of taking political decisions, as well as the uncertainty in respect of the succession of the ways of the country development, are quite negatively reflected on the rating of Kazakhstan. As the distinctive features of the economics of the country one still may mark out the low level of income per person and the considerable disproportions in the development of the regions.

How to become a football magnate

Football business has been much debated lately. Some people consider it to be highly profitable, others think that people deal with it purely “for the sake of the process”. The football club more and more reminds of a usual enterprise, with all following consequences – vulnerability to economic cycles, high changeability of income and even bankruptcy.

Footballers’ trade is not the main source of money receipts. The play itself creates greater flows – to be more exact, these are created by fans who attract advertising accounts. The second income item is the ticket sale. The distribution of season tickets has become the real “science” abroad, and managers of English football clubs have achieved the greatest success in it. They know absolutely everything about the tastes of their fans – beginning from the brand of supermarket they go to up to the nickname of their favorite dog. Consumer preferences help them to sell tickets most efficiently. Address proposals come via Internet, brochures with matches’ timetable and complete information about all the plays of the season are posted.

In the world there are two approaches to the management of football business: one is English and the other is American. In the USA they prefer to live following the traditions of socialism when money received from the matches’ broadcasts are usually shared among the clubs in the equal proportion, and the salaries of the best players are limited to a certain level. This provides incomes that are not very high but “guaranteed”. In Europe the profit of clubs comes to hundreds of millions, but more and more bankrupt teams appear. Russian football now looks more like charity concerned with crime.

The first bank went broke

First private commercial banks appeared in Russia in the middle of the 19th century. Russian financial market of that period promised great profits, and that could not be left without attention of swindlers. The consequence was the series of bankruptcies of commercial banks. The number of bankrupts among the crediting organizations decreased only after the Ministry of Finance of the Russian Empire had toughened the control over the activity of private crediting organizations.