"The XXVth ARB Congress was one of the most memorable", - such an event assessment was given by Avtogradbank Chairman Venera Ivanova who answe­red the NBJ questions under rapid-fire interview. It is difficult not to agree with her: indeed, profile events were rarely held in such a saturated informa­tion background and vital issues were discussed not only for the banking sector but also for the economy as a whole. At that an ordinary atmosphere of such events when small and medium-sized banks complained about the large banks which, in their turn, called for market participants reduction was changed by the spirit of unity. All del­egates agreed in different ways that there is no time in current situation to find out who is right and who is wrong. The banking sector has to be united to solve their tasks, as the whole country has to be united now.

CURRENT OR APPROACHING COLD WAR MODE

It would be strange indeed if the congress which was held in two and a half weeks after the Crimea referendum, did not raise the issue of sanctions, i.e. the issue of cor­responding countermeasures. Therefore, no one was surprised by the fact that the

Chairman of VTB Bank Board Andrey Kostin used the old term "cold war" in his speech. "This is not about the use of weapons against the enemy but about the threat of its use and the willingness to use it, - said the head of VTB Bank. - For the past month we hear from senior Western executives the calls to isolate Russia, vir­tually to destroy the Russian banking sec­tor". However, as Andrei Kostin explained, the modern nuclear weapon in the field of finance is supposed to be used which is the dollar settlements.

There is a counteraction on each action: the VTB head considers that after the adop­tion Russia could take a series of measures.

Here we talk about the development of a national payment system and domestic busi­ness dependence reduction from foreign rating agencies, biased by Western govern­ments and the transition to the settlements in rubles for the implementation of trade deals with Russian foreign partners and the change of rules on keeping the National Welfare Fund and CBR reserves.

The suggestions made by Andrei Kostin were warmly responded by other delegates of the Congress whether they were small and medium-sized banks or the organizations which are considered to be the leaders of the Russian financial market. "Andrey Leonidovich (Kostin - Editor's note) noted in his speech that it would be better to convert NWF funds into Russian currency. It would strengthen the ruble position at the foreign exchange market, -said Vyacheslav Barmin, the Chairman of Ergobank board. - I consider this offer quite reasonable: why keep NWF funds in foreign currency, if the fund may be filled with rubles? It is clear that the gold and forex reserves has to remain gold and forex reserves, so some of them has to be in foreign currency. But the National Welfare Fund is another matter".

"Generally the heads' of state banks speeches are stale and official ones, but this time we heard emotional, very bright speech, full of right ideas and suggestions. Venera Ivanova (Avtogradbank) stated the following: "It is difficult to disagree with the fact that Russian ruble should be pre­sented on the international orbit and the settlements for our products and service delivery shall be performed in rubles".

The congress delegates supported another proposal: the development of a national payment system.

Vera Prokopenko, the deputy of AVTOVAZBANK board Chairman stated the following: "A major step towards the emergence of a NPS will be the establish­ment of an independent joint-stock com­pany under the Central Bank auspices. 90% of settlements are performed in rubles. So why do we have to depend on foreign opinions and demands?"

According to experts, the process of NPS development may be a short one: from two to six months after the neces­sary amendments to the Russian legisla­tion. These terms were stated by Sberbank President German Gref two days prior to Congress. However, not everyone agrees with such an optimistic assessment. "We have to understand that the realization of this idea will require not only significant financial investments but also significant time costs. - It was the warning from the managing director of Expobank Vladimir Mehryakov. - Our financial authorities refer in this regard to the experience of China and Japan, but do not focus their attention on the following facts: the nation­al systems in these countries are local. At that four or five years passed for their development".

Nevertheless, most participants of the congress agreed on one thing: our coun­try can no longer depend on the whims of international payment systems as was the case with the bank "RUSSIA" and four other financial organizations. Our coun­try can no longer depend on the whims of international rating agencies the estimates of which have long been questioned and regarded as politically motivated.

IMPLICIT AND EXPLICIT RESERVES

The issue that troubled all and continues to disturb is the following: what will be the reaction of the Russian banking sector to the worsening of foreign political and economic situation around Russia? Do the banks have reserves which may serve as their in case of situation adverse develop­ment? What is the role of financial authori­ties within the mode of sanctions for the financial system stability development?

Vera Prokopenko (AVTOVAZBANK) stated the following: "During severe circum­stances, the Russian companies mobilize reserves and the banks are not an exception to this rule. We always manage to find a way out of this situation. I hope that at the cur­rent state of affairs the national economy, industry, science, agriculture will be devel­oping more effectively than in a usual, sta­ble environment. An emergency situation makes evaluate it differently as well as to search and find hidden reserves, especially since everyone has such reserves".

Fedor Pospelov, the board Chairman of the "TRUST" National Bank suggested that banks have no hidden reserves dur­ing an emergency situation. On the other hand, our financial and credit institutions are accustomed to keep themselves in a good shape, so their stress resistance is pretty high. "We live in constantly chang­ing economic conditions. In a certain sense it's a frontline situation where we are forced to respond to local and global crises every day, - the expert acknowledged. -During the period of the Russian bank­ing system existence, its participants are regularly shaken on a particular occasion. In my opinion all financial institutions are not relaxed and seek appropriate solutions as new problems appear".

Eduard Galichev, the chairman of "Garant-Invest" CB states that there are always hidden reserves in such a vast country like Russia: "The domestic bank­ing community occupies strong positions. We are talking now about all the market participants and not just about individual major players. Consolidating the efforts of the whole community, we can achieve a lot of progress as at the bank card market (I mean a national payment system), so as in the banking sector as a whole by attracting population deposits, gaining the citizens' trust".

Vera Prokopenko (AVTOVAZBANK) stated that all hidden reserves are well known and are not a secret as for the bank market participants, so as for financial authorities. "Not only deposits but also treasury funds, pension and insurance funds could become long-term resources -the expert said. - One and a half trillion of rubles are on treasury accounts without any circulation. This money can be put in the country economy. Credit companies will send this money for industry, small and average business development. Every­one will make some benefit from continu­ous cycle of funds".

"I am not inclined to dramatize the current situation: in my opinion, everyone will make some benefit from its aggrava­tion as it stimulates business in general, and Russian banks to adopt creative solu­tions, - Ilya Gubin said, the Chairman of Novikombank board. - You can't just "manage the flow", all market participants will be looking for new reserves. Someone will focus his attention on serving small and medium business, someone will start to develop new products and services. As for the general reserve, which all the banks have, it's a capital. It allows credit institu­tions to develop their business".

"ALWAYS AND NOW" ISSUES -FUNDING AND LIQUIDITY

Obviously, sanctions are a serious issue despite their demonstrative nature. Primar­ily they affect the investors' attitude in the Russian economy, stimulate capital outflow from the country and limit (or even reduce to zero) the ability of banks to raise funds at foreign capital markets. That is why, as the participants of the Congress stated, the ways of funding and liquidity issues solu­tion are crucial now and the state assis­tance to the banks is also important.

Anton Siluanov, the Finance Minis­ter stated the following: "The liquidity has become an acute one". We will support you, respond quickly to various situations that may appear in the current year and in the future. We have the necessary tools, so

I would like to say that we have an armored train on the siding line". The Chairman of the Bank of Russia Elvira Nabiullina is con­fident that all the basis tools of liquidity provision are configured. "Of course we are concerned about the lack of market support, it should be developed. We are expanding the application of the № 312-P Regulation. I must say that in recent years the expansion has occurred several times. We constantly increase the range of non-market loans, which we take. Accordingly, we provide liquidity", - the head of CBR said.

The bankers interviewed by NBJ in the congress lobby, generally appreciated the Ministry of Finance and the Central Bank head speeches: they believe it's a positive signal that the regulators do not ignore problems with liquidity and funding. "The position of the market regulator is of fun­damental importance here. It's not a secret that the Bank of Russia resources develop important financial tools that may help to solve the funding problem. We would like to see that these tools are available not only for big banks, but also for medium and small financial and credit institutions holding sig­nificant niches in separate regions", - said Eduard Galichev ("Garant-Invest" bank).

"The problem of foreign markets closure, has not yet declared itself fully. Nevertheless it already sent some nega­tive signals. The regulator declared that it is ready to apply various mechanisms in case of aggravation, including those that were used in 2008. In particular, there is a regulatory framework associated with unsecured lending. This mechanism may support the bank system. It is only a matter of political decision. Besides, the Central Bank has already announced that it would support the banks affected by the adoption of sanctions in case of need. Thus, we see quite adequate measures are in standby mode and they may be applied at any time", - Fedor Pospelov (National Bank "TRUST") commented the situation.

"The expansion of the Bank of Rus­sia provisions № 312-P ("The procedure of loans provision secured by assets or guarantees for credit institutions by the Bank of Russia") adopted on November 12, 2007 is necessary to solve the problem of funding and liquidity". It would be very nice if the banks were given the opportunity to put private loans secured by real estate into the Bank of Russia, -Vyacheslav Barmin (Ergobank) said. -I must say that the regulator has already taken steps in this direction: the prospects of credit adoption as securing means are considered now issued for military mort­gage programs and the securities backed by mortgage credits. And I suggest taking mortgage credits as securitization means at the amount of 10 million rubles at least. Such a decision would have greatly facili­tated the life banks in terms of liquidity management".

SUPERVISORY POLICY WITHOUT CONNIVANCE AND EXCESSES

If the XXVth ARB Congress was held in the end of last year, one of the main topics discussed during speeches and at the lobby, would be the issue of license revocation from a number of financial and credit insti­tutions and more severe bank supervision and regulation. We can not say that it was ignored completely due to "Ukrainian fac­tor", but it didn't bring up any serious dis­cussions. Elvira Nabiullina, the head of the Bank of Russia explained what players can look forward to increased attention from the regulator. "First, these are the banks that may have an increased risk concentration, including owner business, the industry, the region, the concentration of investments in non-core assets. Secondly, these are the banks that have errors in business policy, an unnecessarily aggressive policy, over-opti­mistic assessments of the borrower credit-worthiness, which can lead to an excessive accumulation of risks. The third category of risks is the deliberate actions of owners and management leading to asset quality dete­rioration, the outflow of assets, as well as to the involvement of shadow economy servic­ing, - the head of the Bank of Russia stated and added: - We will perform a balanced and consistent supervisory policy".

Moreover, as Elvira Nabiullina ex­plained, this policy will be pursued not only for the banks, but also to non-bank institutes, as the Bank of Russia performs a single megaregulator functions for more than six months and, according to bankers, copes with its new responsibilities well.

"I think that the recent regula­tor activity may be assessed as posi­tive one, despite the fact that we are faced with stress in the bank sec­tor against the events of late 2013 -early 2014. We do not question the fact that the market is represented by unscru­pulous players and we understand that one of the mega-regulator functions is to clean the market from them. From my point of view, the methods by which the Bank of Russia achieved its goals, could be softer. Probably when you make regulatory and supervisory deci­sions an unstable foreign policy situa­tion and hardly positive developments in the national economy shall be taken into account", - Eduard Galichev said ("Garant-Invest" bank).

"I support the activities of the regula­tor, despite possible differences of opinions on certain issues. I will not hide the fact that sometimes we, as the members of the bank market, bear some of the costs due to tighter control made by the regulator. But in gen­eral, the measures that are applied by CB impact positively on the Russian economy. For example, the revocations of licenses occurred quite reasonably, as money laun­dering and terrorist financing are illegal. The banks, if they want to stay in the market and continue to work shall prevent such opera­tions in the womb and prevent their imple­mentation", - Natalia Ilyinyh, the Chairman of the Federal Bank of innovation and devel­opment commented on the situation.

"The fact that unscrupulous players are removed from the market from time to time is not a surprising and tragic one, - Ivan Svitek, the Chairman of HCF Bank said. -The idea of a single regulatory and supervi­sory authority development in Russia, then is absolutely correct, I reckon. This simpli­fies greatly the operation of government agencies and financial market participants as the consolidation of regulatory require­ments and regulations takes place. In other words, the market rules are clear and trans­parent. We see that the other countries are being developed within the same trend - all attention is paid to the operation quality".

Fedor Pospelov (National Bank "TRUST") believes that there any findings and assessments concerning the Bank of Russia operation effectiveness as a mega-regulator will be the early ones: the period seven months is not a long time. On the other hand there is an undeniable advan­tage the expert said: the arguments that were described by the opponents of Rus­sian financial megaregulator development are not confirmed yet. There is no chaos for the insurance or pension market Fedor Pospelov stated: "We do not see any vig­orous activity from megaregulator within microfinance institution sector by which we are concerned. And in fact there are missing transactions, money and custom­ers there who leaving tightly regulated bank sector".

"The bank supervision effectiveness, as well as its flexibility, directly depends on its ability to break any chain of mistrust that encircles the bank system now", - Alex­ander Zheleznjak, the Chairman of "Life" Financial Group admitted. "The regulator hardly trusts bank accounting, financial institutions doubtfully treat their custom-ers, which in their turn do not trust banks, as well as their counterparts; besides there is a mutual distrust between banks, law enforcement agencies and courts. There is nothing to hide for credit institutions that are stable. They're always open to take part in the fight against customer doubt­ful operations. But such measures are fre­quently turned into highly demonstrative actions of top brass that deal crushing blows to the bank reputation and ordinary clients leave. The result of all this is the growth of distrust to the entire system", - the banker expresses his detailed opinion.

It is difficult to manage without trust even during peaceful periods. And in such stressful periods Russian banks may need a lot: an aid from the state and the ability to find creative ways of its business further development and the regulator understanding - the members of the Congress stated.