As the cleanup of the banking market hurts the economy

Just not in the Bank

According to Rosstat, released on October 2, 2018, the amount of cash in a “mattress” savings continues to grow. The volume itself at the beginning of September amounted to 5.9 trillion rubles. Share “pod” in the cash savings of the population has reached a maximum value from April 2015 and 18.2%.

Как зачистка банковского рынка вредит экономике

In absolute numbers the rest of the cash in the hands of the population is 5,916 trillion rubles (without taking into account foreign exchange savings). Since the beginning of the current year the volume of cash in “pods” of Russians increased by almost 492 billion roubles (growth by 9.1%), and from January 2017 citizens have accumulated at home additionally 1,294 trillion roubles (growth on 28%).

It is obvious that these tools could be useful to the economy in a situation of drying up of external sources, but the fear to lose and so little accumulation increases with every new loud bankruptcy in the banking sector.

As a result, instead of the influx of additional cash into the economy on the insurance payments to the population at the expense of the ASV leaves a significant amount. For the period from 2004 to 2017 was paid 1.7 trillion rubles. Together with the costs of ASV on sanitation of banks ($1.3 trillion) activities of the Central Bank for improvement of the banking system in the period cost at an astronomical $ 3 trillion.

Sweep the market

Since its inception in 2013, the Central Bank policy of “healing” banking sector in Russia has already lost more than 400 banks. Their total number decreased from 897 at 1 January 2013 to 488 for the current date. That is, the banking system lost 45% of payroll.

Since the beginning of this year the regulator has been withdrawn 47 licenses to conduct banking activities. The license for the entire period of “cleansing” has received less than ten new banks.

“Sequestration” of the banking sector is not a global trend. Italy has over 750 banking structures in China — more than 800 in Germany — more than 1,800.

Unpredictable reduction in the number of operating credit institutions leads to quite predictable consequences. First, there is a rapid monopolization and over-centralization of the banking sector. Compressing banking infrastructure leads to a concentration of financial resources in the largest credit institutions, including those whose controlling stake belongs to the state, — Sberbank, Rosselkhozbank, VTB.

Sberbank’s share in total Russian banking sector assets amounted to almost 30%, and the total share of the largest banks with state participation (Sberbank, VTB, Gazprombank, Rosselkhozbank) exceeds 55%. The volume of lending to legal entities the first thirty of banks has grown over the last 4 years by almost 15%, and almost 80% of the total portfolio of loans to companies.

Shooting competition in the banking market will inevitably lead to their appreciation, including to the corporate sector, as well as reduced quality and availability, especially for small and medium businesses. Since a significant part of “stripped” — regional banks, reduced physical accessibility of banking services for citizens and businesses in the regions.

In turn, the big players, in an effort to reduce costs, in no hurry to expand the branch network, and the requirements to the borrowers, each of which is for a large Bank is not critical, are overstated.

In addition, a mass liquidation of banks “the second echelon” leads to direct losses of legal entities, which unlike citizens do not have access to insurance benefits, and the order of repayment of their claims does not allow hope for the return of any significant amount. According to some experts, losses of the Russian economy from the “recovery” of the banking system amount to 700 billion roubles annually, and the main impact is accounted for by business entities.

Finally, it is worth noting the state of uncertainty, which remains the banking industry, and with it all users of banking services. The impression is that policy “normalization”, as the revolution in the well-known expression that has a beginning but no end.

Not in favor of banks

Standing on the rails “Stripping” the regulator in the face to feel the importance of the work of the army qualified staff cannot and does not want to dwell on previous successes.

It is obvious that unscrupulous players have left the field of banking services, while supervisors continue the process of “normalization”. It means “to flow”, in the opinion of the expert and business community, can explore and quite healthy banks.

New regulation initiated by the Central Bank, has exactly the same pain point. Suffice it to mention the proposal to introduce the “truncated” regional banking license, without the right to work in other regions with the restriction of cash flow arising from such defective banking institutions (and the norms of the Constitution on the free movement of goods and services?).

We can recall the proposal to punish banks (up to and including license revocation) for misselling, that is unfair is the Bank or the offer related (e.g. insurance) products in one package with the Bank. It is not a smooth transition from financial indicators to the evaluation criteria the activities of credit organizations?

Raise questions and new regulations “payroll”, closing the road for all but the largest banks. These rules, essentially aimed at forcing the small private players from the market and its further monopolization.

Nedodelannye results

If we look at the developed world economies, including pseudo-Chinese, we find in each of them a competitive and diversified banking sector, providing a maximum coverage of banking services to all types of business, including small and micro businesses, as well as high quality at moderate rates.

Such a contiguous country like Russia, with a lot of depressed regions and low entrepreneurial activity of the population obviously needs to increase the quantity and quality of regional and small private banks.

But the policy leads to the opposite effect: the regional banks, one after another disappear, leaving a financial hole and lack of quality of banking services. And this in spite of the obvious advantages of their existence: good knowledge of local peculiarities, individual approach to the client, responsiveness to market needs, flexible tariff policy, local budgets, effective cooperation with regional development institutions.

If the development of the Russian banking sector will continue to follow the logic of its distinctive way without considering the needs and requirements of business, citizens and regions, in the absence of clear rules of the game, then wait for the faster economic growth will have a very long time.