Private Online Banking in Russia: Tinkoff Cheapest, Sberbank Among the Most Expensive

According to the report by the Marksweb Rank&Report agency, Russians spend hundreds of rubles (1 USD = 63.42 rubles) on online banking services every month. Business daily Vedomosti reports that the agency published its findings in October based on the research that included 30 Russian banks with the largest number of online clients. Examined banks’ fees included everything from the cost of online service, payment commissions, and token usage.
While payments to accounts within the client’s bank are performed without charge, transfers to accounts with other banks cost between 0.5-2% for credit card transfers and between 0.1-1% for direct transfers. However, there are exceptions – for instance, Sberbank charges its customers a fee for transferring money to a credit card issued in a different city.
According to the report, Tinkoff Bank offers the most favorable conditions for its online customers: it doesn’t charge for any of the observed services, including inter-bank credit card transfers for sums up to 20.000 rubles per month. This is not a surprise, as Tinkoff Bank performs all of its business online and has no physical presence. With approximately USD 2.83 billion in assets, Tinkoff is ranked 46th on the list of Russia’s largest banks (one spot below the infamous Peresvet Bank). The largest Russian bank Sberbank, which serves more than 80% of all online banking customers in the country, charges the highest fees. However, bank’s representative stated that most of the clients use services that aren’t subject to charge.

Still Too Many Banks in Russia, Fitch Agency Says

Russian news agency Rosbalt quotes the Director of the Financial Institutions Analyst Department with Fitch Dmitry Vasilyev who stated that the number of banks in Russia remains too high even after the Central Bank’s recent cleanup. The number of banks was reduced from over 1,000 to approximately 600 within the last couple of years, Vasilyev said. He stated that the number of banks per million inhabitants in countries comparable to Russia in terms of GDP is lower than the Russian average. Consolidation of the Russian banking sector continues, but it hasn’t affected the smallest banks yet.

Earlier last week, Fitch blew the lid off the troubled financial condition of Bank Peresvet, a bank that has the Russian Orthodox Church as the single largest shareholder, and reduced its credit rating to “D”, designating a bank with weaknesses.

Moscow Facing a USD 3.2 Billion Deficit in 2017

Russian business daily “Vedomosti” reports that the Moscow city budget deficit is expected to reach 218 billion rubles (USD 3.2 billion) in 2017 due to infrastructure development financing requirements. Moscow authorities plan to invest as much as 1.9 trillion rubles (USD 28.1 billion) in infrastructure in the period 2016-2019 after the city halted most of its development projects in 2015 due to economic uncertainty. Most of the infrastructure budget will be spent on transportation (654 billion rubles, or USD 9.7 billion), primarily to support and expand the metro network. The city will also increase its investments in road infrastructure in order to prepare for the FIFA 2018 World Cup

Orthodox Banking in Russia

One of the most bizarre news from Russia this week features the General Manager of the troubled “Peresvet” bank Alexander Schvets who ended up in an intensive care unit just as his bank was forced to limit the withdrawal of deposits to 100,000 rubles (USD 1,500) per client. On October 14, TV channel RainTV reported that Schvets disappeared after the rating agency Fitch published an audit of the bank’s operations and found that it lent 12 billion rubles (USD 192 million) to companies that hardly have any assets at all. “Peresvet” denied the connection between the disappearance of Schvets and the report issued by Fitch.
To make things more interesting, “Peresvet’s” single largest shareholder is none other than the Russian Orthodox Church with 36.5 percent of the shares. Notwithstanding its numinous background, the bank is keen on supporting innovative technologies: “Peresvet” is one of the founders of two venture fund management companies, one of which was established jointly with Rosnano, Russian government agency for investments in nanotechnology, known for massive losses.

What’s Left of Russian Liquidated Banks

…can be found at https://www.torgiasv.ru/, the specialized site managed by the state Deposit Insurance Agency for the purpose of auctioning off what’s left of Russian failed banks. Slon.ru reports that the Russian Central Bank closed almost one in three banks in Russia since Mrs. Elvira Nabiulina took over its helm. The state Deposit Insurance Agency is tasked with mopping up and currently oversees the liquidation of 287 banks with total assets of approximately three billion rubles (USD 47.4 million), as well as 34 private pension funds.
Assets belonging to failed banks consist mostly of their credit portfolio (64% of the assets), but as these loans can rarely be retrieved, the remaining 36% of the assets are far more interesting: office furniture, IT equipment, appliances, luxury items, art, etc. According to the Deposit Insurance Agency, some of the banks left behind such improbable artifacts as aquarium with a shark, Aivazovsky’s painting or tens of thousands of Russia’s trademark valenki boots. Total estimated value of items offered for sale through the Agency’s auctioning platform is between 100-180 billion rubles (USD 1.6- 2.84 billion).
Registration on the site is free of charge, but a 10% deposit of a lot’s initial value is required to participate in the respective auction.

Rosinterbank Folds and Buries Data on 3000 Clients

Russian business daily Vedomosti reports that approximately 3,000 Rosinterbank’s clients with 5 billion rubles (USD 80.4 million) in deposits might not be able to get their money from the Russian Deposit Insurance Agency after the breakdown of their bank. These clients opened or topped their accounts after July 18, the date on which the Agency last collected the data on Rosinterbank’s deposits. Information on Rosinterbank’s deposits after that date is lost, as the bank pulled the plug on the system that monitored it before it folded. Therefore, the Russian Deposit Insurance Agency has information on 84,400 clients with 52.1 billion rubles (USD 837.75 million) in deposits, while the actual volume of deposits held in the bank at the time of its bankruptcy is probably closer to 57 billion rubles (USD 916.5 million). Former head of the bank Marina Krasnova tried to be helpful and delivered the bank’s internal data on clients from mid September, but the Agency has no intention to rely on the list coming from the bank that had previously deliberately disconnected the centralized data collection system. The Agency will review any documents presented by the bank’s clients who placed their deposits after July 18, but there are no guarantees that their claims will be met.
Rosinterbank was one of the fastest growing banks in the country, jumping from 938th to 61st position on the list of banks ranked by assets within six years, from 2010 to 2016. Its aggressive lending policies eventually prompted the Russian Central Bank to introduce mandatory supervision and place limits on attracting private deposits. However, the bank seems to have continued to attract private deposits and engaged in shadow accounting. This practice is nothing exceptional in Russia – for example, one of the smaller banks, Arksbank, had 4 billion rubles of deposits on its official balance sheet and ten times as much on its “unofficial” balance.

Putin Puts Money Where His Mouth is: Russia to Increase Defense Spending Regardless of Budget Shortfall

Gazeta.ru reports that the Russian Ministry of Finance prepared a proposal for the 2016 budget that involves an apparent increase of military expenditures. Regardless of the budget shortfall of 374.5 billion rubles (USD 6 billion), the Ministry proposes to increase the expenditures by approximately 300 billion rubles (USD 4.8 billion) to 16.4 trillion rubles (USD 262 billion), increasing the deficit to 3.66% of the GDP. As the Ministry plans to cut practically all “civilian” expenditures to offset the shortfall, this will free up a total of 678.8 billion rubles (USD 10.9 billion). The beneficiaries of this balance are not known, but as they are listed in a confidential annex not open to the public, it is very likely that they are related to defense and/or law enforcement.

As usual, some programs and regions will be impacted by the changes to the federal budget more than others, but it is interesting to note that the sequestration will affect even Crimea, as the program for the socio-economic development of the annexed peninsula will be cut by 15.6%.

Amendments to the federal budget management process also seem to be under way and should enable the Minister of Finance to reallocate up to 10% of all expenditures to military and security institutions without consultations with the Government or the Parliament.

The Ministry of Finance refused to comment on either of the proposed changes.