DATE OF REPORT: 990506
OGANES SARKISOV
INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND THE U.S. DEPARTMENT OF STATE, 1999. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.
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Summary: Finding a reliable banking solution is one of the most critical tasks for any business in Russia. This report describes three options available for foreign businesses in Russia and contains a rating of the top-50 banks operating in Russia. Information has been collected from Russian publications ("Dengi I Kredit", "Dengi", "Expert", "Ekonomika I Zhizn", "Kompania", "The Moscow Times", "Kommersant Daily") and industry sources. End summary.
Finding a long-term reliable banking solution is one of the most critical tasks for any business in Russia. There are three basic banking options available to most businesses in Russia including using the services of a wholly-owned subsidiary of large foreign bank; turning to Sberbank, the Russian state savings bank; or using one or more of the Russian private commercial banks to survive the August 1998 crisis.
I.	First solution: Russian banks with foreign ownership.For the time being, the amount of foreign capital in Russia�s banking system is very small. There are only 21 banks with 100 percent foreign ownership and another 12 where foreigners own more than 50 percent of shares. However, the Central Bank of Russia (CBR) has reported growth in the number of banks in Russia fully owned or controlled by non-residents. The foreign capital share of the in overall capitalization of banks operating in Russia also has increased. According to CBR data, the share of foreign capital in Russian banking was 5.33 percent as of January 1, 1999, up in 4.13 percent from 1998. Some banks, such as OOO Raiffeisenbank Austria and ABN-Amro, have announced their intent to increase statutory capital up to $165 million and $120 million respectively. The last version of the law "On Banks and Banking" limits foreign shareholding in Russian banks under a special federal statute that was to be adopted by the government upon coordination with the CBR. No such statute has been adopted yet, and the existing limit of 12 percent was fixed by the CBR before the latest amendment was passed. At the same time, the law authorizes the CBR to permit or forbid charter capital increases of specific foreign banks operating in Russia. Therefore, it is the CBR that effectively enforces the limit on foreign shareholding in Russia�s banking system. Recently the Russian government and the CBR have indicated that the CBR is ready to raise foreign capital limit in the overall capital of Russia�s banking system (from 12 percent to 20 � 25 percent). It is worth noting, however, that at present, foreign shareholdings in Russia�s banking system are well below 12 percent, so the statutory ceiling has yet to have a practical impact.
Most foreign businesses prefer to deal with foreign-owned banks as these banks maintain a high level of stability, safety and service. However, until recently, foreign-owned banks in Russia concentrated mainly on highly profitable financial markets. To meet the demand of clients interested in finding commercial banking solutions, banks have taken steps to diversify the range of their services to businesses, with emphasis on facilitating foreign trade transactions and trade-finance services. Now more foreign banks provide the services of a regular commercial bank, including opening of accounts, transfers, currency operations, crediting, documentary operations, issuance of letters of credit, trade financing; and also opening individual accounts for non-residents and for those residents whose companies have an account in the bank. 
Unfortunately, banks with foreign capital may not be a good solution for businesses expanding their activities to the regions, as such banks usually have offices only in Moscow or St. Petersburg.
Most foreign banks limit new clients because they have limitations with respect to processing capabilities. Foreign banks prefer large corporate accounts from big clients, which have a firm position in their respective market segment or which have large turnover in import or export operations.
Foreign banks, even those with a general license, usually lack capacity to undertake all varieties of operations. Given Russia�s political and legal environment and absence of funds for deposit insurance, most foreign banks are reluctant to attract private deposits on a large scale. Most avoid payroll operations and are also hesitant to provide corporate expense account debiting services.
Following is a list of Russian Banks with 100 percent foreign ownership. Source: "Dengi" Magazine No.12 March 31, 1999 The table provides information on the ownership capital of banks as of January 1, 1999 and the capital changes which have taken place since July 1st 1998.