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Russian Federation

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Banking landscape

Russia is the world's ninth largest economy. Since the collapse of communism it has experienced massive and rapid privatisation, strong economic growth and increased foreign investment, although the state continues to be heavily involved in the private sector. While the services sector dominates, the country remains heavily reliant on commodities and natural resources, and in 2011 overtook Saudi Arabia to become the world's largest oil producer.

The banking landscape is dominated by two state-controlled giants, VTB Bank and Sberbank. Their dominance is symptomatic of an uncompetitive marketplace, which has seen many international banks, including HSBC, Barclays, Santander, Swedbank and Rabobank, leave Russia in recent years after heavy and perhaps incautious investments during the economic boom.

While there are over 1,000 banks in Russia, many smaller local banks are said to be blighted by murky ownership and a lack of transparency. The five largest banks in Russia - Sberbank, VTB, Gazprombank, Russian Agricultural Bank and Bank of Moscow, account for 50% of assets in the sector, and Sberbank alone holds 58% of all retail deposits.

Bank regulation

The Central Bank of The Russian Federation, or Bank of Russia, is the country's primary financial regulator. Its functions are described in the Russian constitution and in Federal Law. Under Russian law, half of the Bank of Russia's profit has to be channeled into the government's federal budget. A key regulatory mechanism is the "On banks and banking activity" federal law, which establishes registration procedures, and defines the operations that banks may carry out.

The Russian financial system continues to suffer from weak governance, including sometimes non-transparent ownership structures and deficiencies in reporting, according to the IMF. Banking in Russia is subject to significant regulatory requirements, although regulation has been described by Standard & Poors as being "heavily rules-based, which allows banks to circumvent the spirit of the regulations". Well politically-connected banks may sometimes have more influence than the regulators.

In July 2011, Bank of Moscow, the country's fifth-largest bank, received a $14 billion bail-out, described as "the largest bailout in modern Russian history" by the Moscow Times. Following a hostile takeover by VTB Bank, it was discovered that nearly a third of Bank of Moscow's assets were "problematic"- namely loans extended to companies connected to the bank's former management. Following the bail-out, the head of supervision at the central bank resigned.

Government policy on bank reform

The financial crisis has set back progress towards reform and a more competitive banking system. During the financial crisis, the Russian state spent $200 billion on a rescue plan to increase liquidity in the banking sector and to help heavily indebted Russian firms.

The primary focus of the Russian state is on increasing private investment in the banking sector, partly for a more competitive sector and partly to improve the state's finances.

In March 2012, Russian President Dmitry Medvedev ordered the state control of VTB Bank and Sberbank of Russia to be reduced to below 50%. According to its privatization plan, the government will sell 35.5% minus one share in VTB in the period 2011-2013, reducing its share from 75.5% to around 40%. The government also plans to sell 25% of its shares in the wholly state-owned Russian Agriculture Bank by 2015, and pull out entirely by 2017.

Sustainability initiatives and alternative banks

In April 2013, Bank Oktritie became the first Russian financial institution to sign up to the Equator Principles. Aside from this, few Russian banks have signed up to sustainability initiatives - Sberbank is a member of the Carbon Disclosure Project, while Vnesheconombank, the Russian Development Bank, is a signatory to the UN Global Compact.

An estimated 60 million people in Russia (42 per cent of the population) have no access to basic financial services (World Bank). However, over a thousand credit cooperatives are active in Russia according to the ILO, and a system of agricultural credit cooperatives and consumer credit cooperatives is developing rapidly.

Russian Federation

Population: 141.9 million (2011)

GDP: 1.86 trillion USD (2011)

Alfa Bank
Founded in 1990, Alfa Banking Group offers a wide range of products and operates in all sectors of the financial market, including corporate and…
Otkritie Bank
Otkritie Bank is a full-service commercial bank that provides traditional banking services and investment, retirement and insurance products. It was formed in 2010 when four…
Sberbank
Sberbank Group, made up of Sberbank and its subsidiaries, is the largest bank in Russia and the former Soviet Republics. Sberbank is the biggest taker of deposits in…
Vnesheconombank
Vnesheconombank is the Russian state owned development bank. The institution is used by the Russian state to support and develop the Russian economy. It receives it's funds…
VTB
VTB Group, made up of VTB Bank and its subsidiaries, is a leading Russian financial group, offering a wide range of banking services and products in Russia, Europe, Asia,…

Russian Federation

Population: 141.9 million (2011)

GDP: 1.86 trillion USD (2011)

Dodgy Deals located in Russian Federation
St. Petersburg PPP toll motorway- Moscow
Russian Federation
co financed by Sberbank, Vnesheconombank
The first section of the Moscow - St Petersburg PPP toll motorway project encompasses the construction of 43 km of motorway. The proposed highway would start at the MKAD…
Baltic nuclear power plant- Kaliningrad
Russian Federation
In 2008 the local government in Russian Kaliningrad region and the Russian state-owned nuclear power corporation "Rosatom" announced a plan to build two nuclear reactors…
Angara Paper mill
Russian Federation
Angara Paper (AP) was founded in 2006 to build a pulp mill in Lesnosibirsk, in the Krasnoyarsk region of Russia. The facility is to be put into service in 2017. The mill…
Amazarsky pulp and paper mill
Russian Federation
Amazarsky is a pulp and paper mill project that is being constructed in the town Amazar, in the Zabaikalsky region of Russia, near the border of China. The project is owned…
check dodgy deals on record
Dodgy Deals abroad financed by banks from Russian Federation
Mountain top removal coal mining
United States
co financed by Alfa Bank, Vneshtorgbank (VTB)
Mountain top removal (MTR) mining is a form of strip mining in which coal companies use explosives to blast as much as 800 to 1,000 feet off the tops of mountains order to…
Stanari coal power plant
Bosnia and Herzegovina
co financed by Sberbank
Energy Finance Team is currently developing a lignite power plant in Stanari, Bosnia and Herzegovina. The proposed 300 MW plant is being built by Dongfang Electric…
check dodgy deals on record

Russian Federation

Population: 141.9 million (2011)

GDP: 1.86 trillion USD (2011)

Companies abroad financed by banks from Russian Federation
EPH
Czech Republic
co financed by Sberbank
EPH (Energetický a Průmyslový Holding) is a Czech Republic based company currently investing mainly in the energy sector in Central Europe. The group's business…
DTEK
Ukraine
co financed by Vneshtorgbank (VTB)
DTEK is an Ukranian energy holding company. It is the largest private vertically integrated energy holding in Ukraine. It was established in 2005 and is an association of…

Russian Federation

Population: 141.9 million (2011)

GDP: 1.86 trillion USD (2011)

2014

Russian Federation

Population: 141.9 million (2011)

GDP: 1.86 trillion USD (2011)

Russian Federation

Population: 141.9 million (2011)

GDP: 1.86 trillion USD (2011)

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