Bank-to-Business Bank-to-Business Interaction in RussiaInteraction in Russia

Aleksandra Alekseevna Dolnikova, 6603

The faculty of Economics and Management, Saint-Petersburg

Electrotechnical University “LETI”

Current situation in the area of Current situation in the area of small and medium businesses small and medium businesses creditingcrediting

Last years Now

High rates of credit increase for non financial subjects of small and medium businesses (SMB) (3-4% per month).

Rates of SMB crediting have been essentially reduced from the beginning of the current crisis.

Why rates of SMB crediting have Why rates of SMB crediting have been essentially reducedbeen essentially reduced

1. The bank resource base growth deceleration that was caused by:

the flight of population depositsdecreasing of credits taken by Russian banks from abroad.

2. Increased risks of SMB crediting

3. Banks desire to stock up liquidity

Growth of “bad” debts amount is Growth of “bad” debts amount is defined by the insufficient credit defined by the insufficient credit security in the kind of risks of:security in the kind of risks of:

Security illiquidity.

Insufficiency of security to cover the amount of debt, percents, penalty, legal costs.

Insufficiency of property, which may be given as security.

SMB problemsSMB problems

Several key conditions are Several key conditions are necessary for this sector necessary for this sector development. Among them are:development. Among them are:

1) Well worked out legislative basis

2) State support

3) Leading growth of enterprises investments into the main capital

“The small business needs for borrowed current is satisfied now

not more than for 15-17%.”

Problems of SMB crediting from Problems of SMB crediting from banks point of viewbanks point of view

Viktor Maevsky, Doctor of Viktor Maevsky, Doctor of economics mentions: economics mentions:

High developed countries Russia

crediting surplus crediting deficit :1. In 90-th this deficit

was spread both to “short” and “long” money

2.During last years it has been coming to the deficit of “long” money only

1.1. “Bad” debts problem “Bad” debts problem

2.2. Credit risk concentration in a Credit risk concentration in a certain branch of industry or certain branch of industry or geographical region. geographical region.

Excess of “normal” concentration of credit portfolio in any branch or region makes problem for the bank in the process of

credit risk monitoring.

3.3. Corporative connections Corporative connections between bank clients. between bank clients.

This problem is an essential problem, that defines the necessity of creditworthiness evaluation examination for SBM subjects, by the way of using that approaches that

are used by banks in the process of consolidated reports preparing.

Mechanisms of the situation Mechanisms of the situation improvingimproving

Problems of SMB initially concentrated not inside the interaction process of bank and real sectors but directly in the area of business and conditions it works under.

But to improve the situation, by breaking the “vicious circle”, is possible and even is necessary with the help of bank and real sector interaction improving.

Change of approach to the process of evaluating SMB subjects financial situations may let to make it.

The following things are The following things are proposed:proposed:

1. To join together evaluating of both security and financial situation during the process of SMB subject rating building, because it exists a group of securities that have easy and fast liquidity. If bank can’t have “super debtors” there is no sense to spent time on deep analyses of financial situation in isolation from securities value.

2. It is reasonable to remove multiplicity of indicators and to formalize the calculating process. Theoretically correct indicator may work improperly under certain conditions and misrepresent the whole picture.

3. Profitability indicators also can’t be critical to evaluate credit risks, break-even is enough one

4. Liquidity indicators (ratio of funds to one or another denominator) also may be found of less importance. Great money amount presence means they don’t work.