US banks are starting to make big investments in Russia again,
and it could be a sign of a looming economic crash for the former
superpower. That's the verdict that consultant Ray Soifer is
drawing from the most recent set of figures from the Federal
Financial Institutions Examination Council.
According to the data, which cover the period to the end of
2002, total US bank exposure to Russia now stands at $3.89 billion.
That might not sound much, but, says Soifer, head of Soifer
Consulting: "the last time it was that high was just before the
crash in 1998. It had reached $6 billion, and had got there in
rapid order. That's happening again." At the end of June 2001,
according to FFIEC, exposure to Russia was $1.435 billion,
increasing to $2.124 billion by the year-end. That's a 271%
increase in 18 months.
Soifer, who's been studying the data from the FFIEC regularly
since 1994 when he was an analyst at Brown Brothers Harriman, says
that such rapid increases often end up with one outcome. "Numbers
changing that quickly is a good indication of trouble ahead," he
says. "We saw it in Russia in 1998, and we saw it in Latin America
in 1994 in the run-up to the Tequila crisis. No-one ever
intentionally makes a bad loan, but when credit exposures go bad
it's usually because their origination dates back to when things
looked pretty good."
The FFIEC is the only place to find out what exposure US banks
have to emerging markets, but if you want to know who's lending all
this, you're out of luck. The government agency's data gives only
aggregate numbers for all banks reporting to it - 74 at last count.
The banks' SEC filings are almost useless as they have only to
detail anything above 0.75% of assets devoted to each country.
Soifer says 90% of exposure is accounted for by five banks: Bank
of America, Bank One, JPMorgan Chase, Citigroup and Taunus Group,
the holding company that Deutsche formed to buy Bankers Trust. Bank
of New York, Wachovia, FleetBoston and HSBC - which bought Republic
in 1999 - account for most of the rest.