RUSSIA: THE NEXT CHAPTERThe easy days are over for Russia's banks. Bankers are psyching up for a shake-out which shows every sign of being lengthy and brutal. By the beginning of the year the 3,500 institutions that sprang up after 1989 had been whittled down to 2,008 banks. Analysts talk of there being just 250 banks in Russia in five years' time. But the shake-out, driven by the restructuring of what were once captive clients for the banks, foreign competition and plummeting GKO yields, could be a good thing for Russian banking since surviving banks will be driven to consolidate and mature into serious financial institutions. But much remains to be done. The biggest challenge is the radical decline in interest rates which has removed one of the main distortions - and sources of income - for Russian banks. High-yielding GKOs sucked Russia virtually dry of cash. There was little incentive to lend to Russian industry with GKO returns of over 200%. "Russian banks were just not prepared to do what banks do in every other country - lend money," says Victor Agroskin, vice-president at brokerage Rinaco Plus. |