Association of Russian Banks (ARB)

2017

The largest 8 banks left ARB

Council  of the Association of Russian Banks at an internal meeting granted on September 12 applications for an exit from association of eight largest banks (Sberbank, VTB, VTB 24, Gazprombank, Rosselkhozbank, Otkrytiye bank, Alfa-Bank, B&N Bank) and also BM-bank.

Also  members of council of ARB  - representatives of the banks  which left Association are debarred from meetings of Council.

Ushchyo 7 banks leave ARB

The head of association Garegin Tosunyan tried to take measures to minimize reputation damage from leaving of the largest banks Association, however did not succeed in it. Its attempts to issue a certain statement that in the ranks of ARB there is no split any more, did not find a response from the remained members of Association in this connection it was even necessary to postpone the meeting of council of ARB planned for July 26, 2017. Most likely, the remained members of ARB took a waiting attitude in the future to adjoin a winning party. On this background at the beginning of August, 2017 consolidation was left by seven more banks – "Ak Bars", Zenit, Lipetskkombank, Sovcombank, Absolyut-bank, the Sviaz-Bank and Rosevrobank. However, this time everything passed without excess noise.

It is obvious that the voice of that consolidation which will include the largest domestic banks will sound more loudly. Sberbank made the choice, having submitted the declaration of accession to ARBR. It was expected that after departure of grandees of the banking sector, the weight and the authority of ARB will fall. It does not mean that the consolidation headed by Mr. Tosunyan will stop the existence. However, hardly the Central Bank will pay much attention to the Association representing the interests of banks of which about 5% of a banking system of Russia are the share.

Small and medium banks can be extreme in a present situation. Garegin Tosunyan already made a warning:

"The narrow bank group is interested in opinion of most market participants little. Our key disagreement also consists in it".

Expected reforming of ARB

As it became known on July 18, 2017, as a result of an exit from Association of Russian Banks of eight key players it can be merged into alternative ASROS led by the native of the Central Bank.

The closest alternative of ARB is the association of Russia regional banks (ASROS) which is headed by the deputy of the State Duma Anatoly Aksakov. The concept of new form of cooperation, according to sources of RBC, can be selected already in the coming month.^[1]

"That we definitely do not want - it is to remain in that framework which exists in ARB. Now we consider different options — either creation of new association, or integration of Russia association" — reported a source in one of the banks which left ARB. "The option of accession is considered on condition of cardinal reformatting of Russia association" — other interlocutor of RBC added.

According to bankers when the largest banks go to other lobbist structure, existence of ARB will lose sense, and its accession to ASROS will be logical succession of events. It is supposed that one of two employees of the bank of Russia acting now can head the joint association. As specified the source familiar with the course of this discussion, among two major candidates — the first deputy chairman of the Bank of Russia Georgy Luntovsky and the adviser to the chairman of the Central Bank (the former first deputy chairman of the Central Bank on supervision) Alexey Simanovsky. According to RBC, the decision can be made in the nearest future.

The post of the chairman of the board of association is allocated for the current president of ASROS Anatoly Aksakov heading the State Duma Financial Market Committee in new consolidation, reported one of sources of RBC.

It is expected that for bankers the joint association will cut down expenses on membership fees. The cost of annual participation in ARB, according to participants of the banking market, is 65 thousand rubles a year from credit institution.

8 largest banks leave ARB because of disagreement with criticism of the Central Bank of the Russian Federation

On July 17 the secession the ARB was officially announced by Sberbank, VTB, VTB 24, Opening, Rosselkhozbank, Gazprombank, B&N Bank and Alfa-Bank. They explained the solution with the fact that constructive dialogue in Association is replaced with "hours-long speeches", and all important decisions of a name of Association "are often made by the president solely and have populist character".

As specify sources of RBC, of all listed reasons excessive, according to bankers, the criticism of the Bank of Russia in the annual report of association in anticipation of the annual congress of ARB planned for March 28 became key. Though it occurred in March, the question was not settled since then.

Claims to the Association of Russian Banks were concretized later Chapter VTB 24 by Mikhail Zadornov. According to him, the efficiency of ARB as the coordinator and the expert strongly decreased, its functions perform banks today, independently carrying out expertize of the legislation, developing necessary amendments, directly communicating with parliamentarians and the Central Bank. Actually the Association was accused that it does not execute the lobbyist's duty assigned to it.

"We, eight banks, repeatedly tried to change established practices of work of ARB and for today exhausted all opportunities of the solution of this question in ARB. Therefore we are forced to leave the Association of Russian Banks" — Chapter VTB 24 Mikhail Zadornov commented on RBC a situation.

In the statement of eight bankers it is emphasized that the largest banks are ready to the new format of interaction with the regulator which is not excluding including creation of new professional association or conversion of the operating professional associations in the banking market.

Alfa-Bank explained the solution with "unsatisfactory work of the management" of association which, according to representatives of Alfa-Bank, at decision making ceased to consider the interests of members of ARB. It is possible to study contents of the official statement of bank here in more detail.

Intend to select other format of interaction for the purpose of development of the banking sector of economy of the Russian Federation, representation of the interests before the Bank of Russia and state bodies from "Alphée Bank" and also developments of joint solutions on the interesting questions of banking activity and optimization of the legislation regulating activity of financial institutions. Including creation of new professional association or conversion of the operating professional associations representing the interests of credit institutions is not excluded.

On the same day the head of ARB Garegin Tosunyan said that he is not going to leave the post. However, according to left, replacement of the management would give nothing as structural reforms are necessary for overcoming the crisis which long ago was imminent in this organization.

What effects can the demarche of eight large banks have? Their leaving is reduced first of all by the authority and lobbist opportunities of ARB. Hardly the Central Bank of the Russian Federation will pay much attention to the Association representing the interests of banks of which about 5% of a banking system of Russia are the share. Besides the relations between the regulator and ARB were strongly impaired a little by excessively emotional criticism of actions of the Central Bank by Mr. Tosunyan.

Each of eight banks has enough resources independently to resolve issues with representatives of power structures. However from consolidation of their opportunity will only increase. Therefore banks do not exclude creation of a certain new bank consolidation, but already in the form of more free association.

At the same time eight banks left the structure of ARB so far only in words – they did not provide any white papers about the end of membership in Association. Thus, probability that banks will review the solution and will return, – but not is not excluded at the current head Tosunyan.

Alfa-Bank breaks off the relations with ARB

In March Alfa-Bank distributed the statement where it expresses the disagreement on a number of questions with the outputs and estimates which are contained in the annual report of Association of Russian Banks. Bank did not take part in preparation of the document therefore it considers inadmissible its publication on behalf of all members of Association. The report stylistics containing charges of the Central Bank of Russian Federation of cynicism, favoritism, work of the mode of "military operations", deliberate reduction of number of banks, use of Jesuit formulations, undermining banking system stability and also competition suppression contradict spirit of constructive interaction and cooperation which developed between regulating authority on behalf of the Bank of Russia and a healthy part of a national banking system.

According to Alfa-Bank, competition level in financial market is not defined by the number of credit institutions. Not the quantity, but quality of credit institutions and existence in the system of weak, unfair players remains the most important threat of the competition. Banks which lost the capital should be removed from the market. The bank supports efforts of the regulator on cleaning of a banking system. For providing competitive environment it is important not to allow unreasonable differences in regulation of private financial intermediaries and the organizations with the state participation.

Alfa-Bank considers reasonable offers of the Central Bank of Russian Federation on proportional regulation of credit institutions. It is about implementation of the international approaches distributing requirements of Basel standards of the large, working at international market banks, and decrease in regulatory pressure upon small credit institutions. The practical task consists in specifying the final legislative wordings and to consider the real commercial interests of all bank groups. It needs to be made in the quiet and weighed dialog, without loud slogans, charges and labels. Thereby the Russian banking system should prove the maturity and readiness for changes.

Due to the significant discrepancy of positions of the Association of Russian Banks and Alfa-Bank on current problems of development of a banking system the bank stops the membership in the Association of Russian Banks.

The head of the Central Bank urged Association not to act as the lawyer of bad banks.

"Therefore to me it is strange that the ARB constantly urges us not to revoke the licenses. To us it is very strange that the ARB does not condemn circuit operations of banks on an output of assets from banks, and did not make an attempt to development of standards of ethical behavior in the market" — the head of the Central Bank of the Russian Federation Elvira Nabiullina at a congress of the Association of Russian Banks said. "At the same time we act exactly under the law. Many people who were included for years into governing bodies of ARB led the financial institutions to crash. It means that people at least stupid and short-sighted and as at most — unscrupulous were a part of governing bodies of association. In this situation of ARB you should not act as the lawyer of bad banks".