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INTERACTION OF REGIONAL BANKS AND BUSINESS SECTOR AS A FACTOR OF SUSTAINABLE DEVELOPMENT OF THE SAMARA REGION
Abstract
Development of the banking sector of the Russian Federation faces a large number of problems: operations of the regulator, shown in revocation of licenses and increase of a key rate, restriction of external loans, decrease in trust of the population. In these conditions, development of regional banks has to be carried out on the way of their active interaction with a business sector by means of active participation of the regional authorities. Use of mechanisms of subsidizing of the interest rate on credits of regional banks has to promote increase of enterprise activity of subjects of small and medium business and increase stability of credit institutions.
Keywords
regional banks, credit portfolio, small and medium business, subsidizing of the interest rate on credit
AUTHOR
Evgeny Porotkin
PhD in Economics, Associate Professor Department of Finance and Credit and Financial Right Samara Academy of State and Municipal Government Department of Economy, Finance and Accounting Samara Institute of Management Samara, Russia evg.porotkin@mail.ru
In conditions of financial crisis and insufficient volume of financial resources, which small and medium business has for the development, the banking system has to become some kind of catalyst of regional economic development. The modern regional banking market consists of territorial offices of the Bank of Russia, branches of large network banks, generally with the state participation, and the credit institutions registered on the territory of the region. It would be desirable to talk about the last group of financial credit
institutions details since effective development of real sector of economy depends on their policy for real sector of economy of the region.
For several decades people told about the need to develop small and medium business, various mechanisms of its stimulation, but real break in this sphere did not happen. Thus, one of the key factors constraining large-scale development of small business is inaccessibility to raise the loan capital. In our opinion, the solution of this problem is possible by means of active involvement of small and medium business of regional banks in process of financing. The branches of large banks working at the territory of the region cannot effectively work at this direction owing to universality of the services and impossibility of providing unique service to the specific borrower-businessman for the solution of its pressing problems. Besides, they have peculiar excessive to bureaucratization, when issues are resolved by appealing to the company's head, and decision-making on issuance of credit or restructuring of debt is unreasonably tightened. For small business, questions of efficiency and individual approach to bank service come to the forefront that is rather essential competitive advantage of small regional banks. In this regard, questions of effective interaction of regional banks and business sector are especially actual, especially in conditions of the declared course on import substitution.
Recently the banking system of Russia in general and its separate elements in particular is under the enormous pressure from a set of the parties caused by both objective and subjective factors. The main components of this pressure are:
1. Strengthening of banking system control by the regulator, shown in practice in mass revocation of licenses generally of small banks, which average size of assets made 10 billion rubles (Vedev, Drobyshevsky, Sinelnikov-Murylev, Khromov).
Process of licenses revocation was significantly accelerated after Elvira Nabyullina had taken office of the head of the Central Bank on June 24, 2013. It is slightly more than in one and a half years (as of January 29, 2015). The Central bank withdrew licenses of 104 banks; the last banks in this list were JSC CB AkademRusBank (Moscow) and VLBANK (AO) (The Irkutsk region, the city of Ust'-Kut).
The main reasons for licenses revocation were:
- non-compliance with requirements of legislation in the field of counteraction of legalization (washing) of income gained in the criminal way, and financing of terrorism;
- carrying out the high-risky credit policy connected with placement of money in low-quality assets;
- decrease in the size of own means (capital) below the minimum value of authorized capital;
- carrying out doubtful operations with cash and withdrawal of funds in large volumes abroad.
2. Reduction of opportunities for external loans in connection with introduction of the anti-Russian sanctions by the certain states (generally it concerns large banks with the state participation).
3. Outflow of means from the population deposits in connection with sharp weakening of national currency rate, inflation and decrease of population trust to small and average banks that leads to reduction of liquidity of financial institutions and threatens their financial stability.
4. Central bank increased the key rate to 17% that in the short term can affect credit policy of banks by increase of interest rate for again granted loans and reduction of a credit portfolio (later since February 2, 2015 it was lowered to 15% that would hardly have essential impact on increase of credit activity).
The Samara banking market as the integral part of the all-Russian market is influenced by all above-mentioned factors. Besides, the banks registered on the territory of the Samara region (regional banks) are compelled to test fierce competition with branches and representative offices of large banks.
The state on 01.01.2015 counted 15 regional credit organizations in the Samara region and 45 branches of the banks registered in the other regions, mainly large banks with the state participation (hereinafter in the text data of http://www .cbr.ru Bank of Russia/). It should be noted that JSC Clearing House of the Samara Currency Interbank Exchange is non-bank credit organization; in this connection in the further research, the number of regional banks will be equal to 14.
On an indicator of concentration of extra-regional branches, the Samara region is on the second place after the Nizhny Novgorod Region in the Volga Federal District and on the 7th place in the Russian Federation in general that testifies to the serious interest to the region among large financial credit institutions caused by the level of its economic development.
From 14 regional banks of the Samara Region, 4 banks (29%) are not capitalized banks, which are not be able to fulfill obligatory requirements of the regulator in 2015 taking into account coming into effect of new requirements for the size of authorized capital 300 million rubles (fig. 1). The volume of necessary recapitalization on them totally makes nearly 390 million rubles. It should be noted that the Central bank would direct special supervising attention on such banks (Sukhov, 2014).
FIGURE 1. STRUCTURE OF THE REGIONAL BANKING SECTOR IN SIZE OF AUTHORIZED CAPITAL (NUMBER OF BANKS, SHARE IN %) ON 01.01.2015.
Interaction of banking and business sector of the region has been dynamically developing in recent years(tab. 1).
The total amount of raised funds of organizations by the banking sector of the Samara region for the beginning of 2014 made 131,1 billion rubles (growth in 2,2 times in three years). The share of regional credit institutions in the raised funds practically steadily was about 40% with a failure to 34,4% in 2013. Growth rates of the raised funds by branches exceeded a similar indicator on regional banks on 7,1 percentage points.
Crediting of business sector for the studied period increased almost by 85% and reached 1,1 trillion rubles. The share of regional banks in the credits issued to the organizations reduced from 57% to 50,5% at essential lag in growth rates of a credit portfolio.
Arrears of the organizations to the banking sector of the region during 2011-2013 reduced by 16,6%, the debt only by regional credit institutions reduced more than by a third (their share in this indicator makes only 12,6%).
■ 150-300 million rubles
300-500 million rubles
0,5-1 biLlion rubles 1-10 billion rubles ■ more than
10 billion rubles
The volume of financing of small business in the Samara region for the considered period grew by 38,4% and made 185,9 billion rubles. Thus the credit portfolio of regional banks even reduced by 5,6%, and their share decreased from 65,5% to 44,6%.
In our opinion, such situation is caused by high risks of small business financing, which big share in a credit portfolio directly can affect stability of small regional banks.
In structure of the Samara regional banks on 01.01.2015, the credit institutions focused on business sector in the credit policy (fig. 2). 10 banks (72%) registered on the territory of the region had 60% and more. share of the credits to the organizations in a credit portfolio.
Considering the structure of a credit portfolio of regional banks, it is necessary to pay attention to JSC Rusfinance Bank, being the large regional specialized retail bank, which key directions of business are car loans, credit cards and consumer credits.
TABLE 1. DYNAMICS OF INTERACTION OF BANKING AND BUSINESS OF THE SAMARA REGION,
BILLION RUBLES (FOR THE BEGINNING OF YEAR)
Change, billion
Indicator 2011. 2012. 2013. 2014. rubles. Change, %
Deposits and other raised funds of organizations
The Samara Region 59,1 81,0 83,8 131,1 72,0 121,8
including regional banks 23,9 31,0 28,8 52,0 28,1 117,6
branches of extra-regional banks 35,2 50 55 79,1 43,9 124,7
Share of regional banks, % 40,4 38,3 34,4 39,7 - 0,8 -
Volumes of crediting of legal entities and individual entrepreneurs
The Samara region 594,7 820,5 951,9 1099,8 505,1 84,9
including regional banks 338,7 405,2 452,0 555,4 216,7 64,0
branches of extra-regional banks 256,0 415,3 499,9 544,4 288,4 112,7
Share of regional banks, % 57,0 49,4 47,5 50,5 - 6,5 -
Arrears on the credits of organizations
The Samara region 31,4 33,0 26,5 26,2 - 5,2 - 16,6
including regional banks 5,0 4,2 3,3 3,3 - 1,7 - 34,0
branches of extra-regional banks 26,4 28,8 23,2 22,9 - 3,5 - 13,3
Share of regional banks, % 15,9 12,7 12,5 12,6 - 3,3 -
Volumes of crediting of small enterprises and individual entrepreneurs
The Samara region 134,3 151,4 157,7 185,9 51,6 38,4
including regional banks 87,9 84,2 64,7 83,0 - 4,9 - 5,6
branches of extra-regional banks 46,4 67,2 93,0 102,9 56,5 121,8
Share of regional banks, % 65,5 55,6 41,0 44,6 - 20,8 -
This financial institution quite conditionally can be carried to the regional banks, since it is completely under control of Moscow Rosbank, which, in turn, enters one of the world's largest banking groups Societe Generale. The main sources of funding are the funds raised from parent group, and public loans (Banki.ru). The share of JSC Rusfinance Bank in a credit portfolio of regional banks makes 42,6%, and in crediting of the enterprises and organizations - 0,2%.
Among biggest regional banks (fig. 3) are JSC Pervobank (23% of total amount of loans granted to enterprises and organizations), JSC Avtovazbank conducting activity under the
AVB Bank brand (20%), JSC ActiveKapital Bank (14%), JSC JSB Gazbank (13%), JSC Commercial Bank FIA-Bank (10%), JSB Tolyattikhimbank (7%). The share of other banks of credits to legal entities of the Samara region is 13% in the sum.
FIGURE 2. STRUCTURE OF THE REGIONAL BANKING SECTOR ON SHARE OF THE CREDITS TO ORGANIZATIONS IN CREDIT PORTFOLIO (NUMBER OF BANKS, SHARE IN %) ON 01.01.2015 (ACCORDING TO HTTP://WWW .BANKI.RU PORTAL)
■ AVB Bank ActiveKapital Bank
■ Gasbank Pervobank
■ Togliattikhimbank
■ FIA-Bank other banks
FIGURE 3. STRUCTURE OF LOANS GRANTED TO ORGANIZATI ONS BY REGIONAL BANKS ON 01.01.2015 (ACCORDING TO HTTP://WWW .BANKI.RU PORTAL)
The volume of arrears of enterprises for credits to regional banks on January 1, 2015 makes 5,5 billion rubles that makes 4,7% of the total value of granted loans. It should be noted that 43,7% of all arrears (2,4 billion rubles) is the share of the Samara bank 'Solidarnost', which undergoes sanitation procedure at present, a sanator is the financial group 'Layf' - the bank holding created on the basis of Moscow "Probusinessbank". After solvency crisis ,which the bank met at the end of 2013 owing to excessive demand for cash withdrawal by clients as a result of hearings about bankruptcy of the credit organization, 'Solidarity' continues to increase delay on the credits, now its share reaches 16,1% of
portfolio and grows in dynamics. Thus, business sector can be carried to rather disciplined borrowers, if not to take in attention a problem of separately taken credit institutions.
The important factor of interaction between regional credit institutions and business sector is granting the average and long-term credits, which, as a rule, are directed on improvement of material base and other investment purposes. Such long-term cooperation of banks and organizations promotes modernization of real sector of economy of the Samara region and full realization of its high production, scientific-technical and innovative potential (Tershukova, Tokar, 2014).
The cumulative share of the average and long-term loans granted by regional banks to business sector on the beginning of 2015 makes 58% that guarantees borrowers a certain level of financial stability.
FIGURE 4. STRUCTURE OF LOANS GRANTED TO ORGANIZATIONS BY REGIONAL BANKS ON GRANTING TERMS ON 01.01.2015 (VOLUME OF FUNDS IN MILLION RUBLES, SHARE IN %) (ACCORDING TO HTTP://WWW .BANKI.RU PORTAL)
Further development of system of regional credit institutions and business sector has to be carried out by their active interaction by means of realization of various state mechanisms of small and medium business support. Interest of all parties in similar interaction does not raise any doubts. Therefore, the region receives the following benefits:
- the active development of bank and enterprise sectors, solving social problems in conditions of crisis, such as creation of new workplaces, increase of an employment rate and income of population;
- increase in tax revenues from both effectively working businessmen, who received funds for the development, and profit of financial credit institutions, which favorably placed the capital.
Business sector can get the following advantages:
- receiving credit resources on profitable terms;
- individual approach to crediting and providing the accompanying services;
- flexible approach in questions of restructuring of debt on credits.
Regional banks have to receive serious benefits from such cooperation:
- guarantees from authorities of the allowed loans return;
- increase in credit portfolio with the guaranteed marginality that would relieve banks of funds investment in more risky assets and, as a result, would increase their stability and profitability.
Credits on 1-3 years Credits on more than 3 years Credits on [ess than 1 year
The mechanism of interaction has to be based on the region's subsidizing of interest rate for loan granted by bank, which is a guarantee of its return (Nikitina, 2012). The key difference of the offered interaction mechanism from existing ones is primary participation in its realization of regional banks, since they have certain advantages in comparison with branches of extra-regional banks: flexibility, mobility and individual approach to crediting, and also payment of taxes in the regional budget.
It is supposed that within realization of the similar mechanism, businessman would independently choose regional credit institution, which would offer more favorable and convenient services in granting the credit. The regional authorities would be engaged in examination of the project, within which the loan would be granted, and would carry out subsidizing of interest rate for the credit at the expense of the regional budget funds.
However, it should be noted that the approved state program of the Samara region 'Development of business, trade and tourism in the Samara region' for 2014-2019 does not provide assignment for subsidizing of interest rate for credits to small and medium business. Though it comprises a task of access expansion for of small and medium business subjects to credit and financial resources. The financing amount of this direction in 2015 has to make nearly 88 million rubles, and during 2014-2019 more than 0,5 billion rubles (The resolution...).
In such conditions, possibilities of small and medium business on financing their activity are significantly reduced, especially in conditions of current situation on the capital market.
REFERENCES
1. Banki.ru, information portal: banks, deposits, credits, mortgage, ratings of banks of Russia, from http://www.banki.ru/banks/bank/rusfinancebank, retrieved 05.02.2015.
2. The resolution of the government of the Samara region of 29.11.2013 No. 699 "About the statement of the State program of the Samara region "Development of business, trade and tourism in the Samara region" for 2014-2019".
3. Nikitina, E.B. (2012) "Necessity and ways of increase of the status of regional banks in the Russian banking system", Bulletin of the Perm university. Economy series, No. 4(15), pp. 78-79.
4. Sukhov, M. I. (2014) "Topical issues of development of the banking sector", Speech of the vice-chairman of the Central bank of the Russian Federation M. I. Sukhov at the XII International bank forum "Banks of Russia, Money and the credit, the XXI Century, 9/4/2014, Sochi, No. 10, p. 6.
5. Tershukova, M. B. & Tokar, A.E. (2014) "Regional banks as factor of development of real sector of economy of the region", Regional development, No. 2, p. 105.
6. Vedev, A., Drobyshevsky, S., Sinelnikov-Murylev, S. & Khromov, M. Actual problems of development of a banking system in the Russian Federation, form http://www.iep.ru/files/text/policy/2014-2/vedev_sinelnikov_khromov_drobyshevskiy.pdf, retrieved 03.02.2015, p. 13.
