Transcript Financial integration in post soviet space

Financial integration
in post-soviet space
Anna Abalkina
Baku, 2010, 27 may
The CIS banks development trends
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Progress in financial markets development
But they still remain highly vulnerable
The limited role of banking systems
Dependence on global financial markets
Despite considerable improvement in the CIS
region banking systems, regional banking
markets are quite poorly integrated and differ
widely in terms of the structure and size of their
operations.
Financial intermediation: regional
comparison (assets/GDP, %)
Assets of the CIS banking systems
1 400 000
$ mln
1 200 000
Belarus
Kazahstan
Ukraine
1 000 000
800 000
600 000
Russia
400 000
200 000
0
2005
Russia
Georgia
2006
Ukraine
Moldova
2007
Kazahstan
Armenia
Belarus
Tajikistan
2008
Azerbaijan
Kyrgyz
2Q 2009
Uzbekistan
Models of financial integration
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Crisis hit financial markets of the CIS countries
Key question – stabilization of their financial
markets and development of regional capital
market
2 models of financial integration
 European financial integration
 Goal: single financial market
 Rule of single price
 Removal of restrictions on market access
 Infrastructure
 Business interaction
 East Asian experience
 Goal: development of financial market segments
Legislation
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The national legislation of the CIS countries and bilateral
and multilateral agreements between them do not
establish preferential banking regulations for owners of
banks who originate from the CIS countries
Most favoured nation treatment (MFN) is now granted to
bank founders from the CIS countries, as it is to other
non-resident shareholders, but MFN allows to apply
restrictions for foreign financial organisations
Eurasian economic community initiative to built common
financial market
Banking cooperation of the CIS
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Post soviet space is one of few regions where credit
institutions from CIS have favorable perspectives to
develop banking business
 the level of development of banking systems of CIS
countries doesn’t allow their banks to compete with
commercial banks originated from developed
countries
 Post-soviet space corresponds to the possibilities of
CIS banks
 banking cooperation is often indicates the level of
economic interaction between home and host
countries
 Thus, asymmetric participation of CIS banks speaks
for fragmentariness of bilateral economic cooperation
in the region.
The CIS banks on post-soviet
space: regional perspective
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Regional expansion of the CIS banks is
asymmetric.
State banks (mainly Russian) became the key
players in mergers and acquisitions in postsoviet space.
Credit institutions from post-soviet space
increase their role in banking systems of
neighboring countries
Regional banks have emerged whose
development strategies involve expansion into
post-Soviet countries
Multinational banks of the CIS
region
Bank
Home
country
Total assets in the
CIS region, $mln
Total capital in the
CIS region, $mln
Number of
subsidiaries
VTB
Russia
4 887,9
520,1
5
Alfa
Russia
4 608,3
521,9
3
Vnesheconombank
Russia
4 283,1
621,3
2
BTA
Kazakhstan
3 687,1
835,3
10
Kazcommerzbank
Kazakhstan
1 472,4
114,7
2
Sberbank
Russia
1 436,0
422,6
2
Bank of Moscow
Russia
945,7
110,2
2
Gazprombank
Russia
790,9
160,4
2
Privatbank
Ukraine
592,2
59,7
2
Rosbank
Russia
494,1
31,7
1
Cross-border investments
CIS home country banks
70,00
35
60,00
30
29
50,00
25
40,00
20
20
30,00
15
20,00
10
10,00
5
2
Russia
Kazakhstan
Ukraine
Share of home country, % (left scale)
Georgia
2
1
1
Azerbaijan Uzbekistan
0
Armenia
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Number of subsidiaries in the CIS region (right scale)
CIS host country banks
50,00
16
14
14
14
40,00
12
35,00
10
30,00
10
25,00
8
20,00
6
5
15,00
6
5
4
10,00
3
2
5,00
2
1
0,00
0
Ukraine
Russia
Belarus
Kazakhstan
Share of host country, % (left scale)
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5
0,00
45,00
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Armenia
Georgia
Kyrgyzstan Azerbaijan
Moldova
Number of subsidiaries held by banks from the CIS region (right scale)
at least 30 CIS banks
which have operating
subsidiaries in the region
the number of banks they
control increased to 60
In 2008 banks’ crossborder investments in the
authorized capital of CIS
credit institutions reached
$4bln (total assets of
controlled banks stood at
$26,8bln).
The rule of single price?
40
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35
30
25
20
15
10
5
0
2000
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2001
2002
2003
2004
2005
Belarus
Kyrgyz
Russia
Azerbaijan
Georgia
Ukraine
2006
2007
Tajikistan
2008
2009
While harmonized price for
credit resources acts as a
precondition of the integrated
banking market, greater
banking cooperation does not
lead to such harmonization.
Armenia
Modest volumes of capital movement among post-Soviet countries
are the reason for the high differentiation in monetary parameters,
(Vernikov, 2006)
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experience of the modern financial crisis indicates that
the scale of banking integration increases.
Current financial crisis also promoted inter-governmental
discussions on common mechanisms to stabilize
economy
those measures are not sufficient to stabilize regional
economies during financial breakdowns.
Tightening credit markets, decreasing export revenues
and economic recession necessitate the reduction of
the CIS countries dependence on international financial
markets and the development of regional capital and
monetary markets
Possible alternatives
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Eurasian bond market
There are certain obstacles to its achievement,
for instance, the absence of sovereign ratings for
some countries
Capital markets can be developed through the
redistribution mechanism of multilateral
development banks (raising funds through
bonds and transforming them into loans).
Financial centers development
Net investment position of selected
CIS countries
300000
250000
$mln
200000
150000
100000
50000
0
-50000
-100000
-150000
-200000
belarus
georgia
azerbaijan
russia
Ukraine
kazahstan
Regional monetary market
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Modest usage of local currencies
ineffectiveness of usage of foreign currencies during
crisis times because fluctuations of exchange rates of
local currencies are less against each other than against
US dollar or euro (Mishina, 2009)
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the exchange rate of Kazakh tenge vs Russian ruble fell by 1%
from 2008, August till 2009,August. At the same time the
exchange rate of dollar rose by 26% and euro by 23% against
tenge.
During the same period the exchange rate of Russian ruble
against Ukrainian hryvna rose by 25%, thus dollar rose against
hryvna by 65%
Liberalization of their monetary markets is needed