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MOSCOW. (Anatoly Gorev, financial analyst, for RIA Novosti)
The problem of unpaid consumer loans in Russia has been a topic of
discussion for some time now. Recently, however, it has begun to attract
even greater attention.
According to the Russian Central Bank, the value of arrears on loans to
individuals soared by more than threefold over the year. Investors are
worried not so much by the fact of growth itself as they are by its pace.
This threatens the stability of the entire banking system, financial
experts say.
The Central Bank has published statistics on the country's top 30 banks
dated January 1, 2007. It shows an increase in consumer loan arrears from
10 billion rubles on January 1, 2006, to almost 33 billion rubles a year
This news alone would be enough to shake the Russian banking sector. The
next day, however, another piece of news, equally striking if more local,
was announced. “Russia's chief collector,” Yevgeny Bernshtam, owner of the
Sekvoiya agency, was appointed president of Home Credit and Finance, which
is viewed as the leader in unpaid consumer loans. According to various
sources, its loan arrears equaled 15%-20% of extended loans at the end of
2006, while the average for Russia did not exceed 3%.
The first news raised concerns not only about the growth of arrears, but
also about the pace of it. It is the first time the market has seen such a
surge, said Yulia Arkhipova, chief analyst with Rus-Rating.
As to Bernshtam's appointment, most view it as definite proof of the old
maxim that tough times require tough decisions: HCF's problems with
consumer loan arrears are so serious that the bank needs an in-house
collector, who will also be in charge of the bank’s entire business.
Yet no one seems to be gloating: in the current situation, when competition
is forcing banks to ease loan terms and requirements for borrowers, no one
is guaranteed against a surge of ‘bad debts’ in the portfolio. The same, as
HCF has proved, is true about subsidiaries of foreign banks, which have
extensive experience on other markets and have more reliable systems for
checking borrowers than most Russian banks.
What will be next? Will the trend be reversed? Experts do not seem to have
a definite answer. Anatoly Aksakov, deputy chairman of the State Duma
banking committee, says he fears that the share of debt arrears in the
consumer loan portfolio of Russian banks may reach "the critical threshold
of 7%." "This would mean that actual arrears are at least two times higher
and would represent a serious threat of a banking crisis," he emphasized.
Surprisingly, executives of foreign banks' subsidiaries are more
optimistic. Philippe Delpal, chairman of the banking committee of the
Association of European Businesses in Russia, admitted that the possibility
of a non-payment crisis could not be totally ruled out. But, he said,
"today, when leading banks are focusing on developing modern scoring
models, credit history bureaus are emerging, and the level of clients'
education in credit products is growing, we have all the necessary
conditions for minimizing risks. So I am positive that there will not be a
non-payment crisis in the next three years, first of all due to the Central
Bank's policies."