Russia » Economics
Author`s name Michael Simpson

Major Russian Bank Gives Away People's Money to Oligarchs

Sberbank has refused to consider a foreign investor's analysis
Sberbank (Savings Bank) is traditionally considered to be a state bank, although it has its private shareholders, including foreign ones: And Sberbank's shareholders have tired of Russian know-how — they claim that the Sberbank’s management has not been efficient.

This seems to be a wonderful example of what Russia's membership in the World Trade Organization will bring, as well as of the opening of new markets in order to be able to compete with foreign companies. At the end of the day, Russia is not the West, and the Russian kind of business is rather unusual — it brushes aside any criticism, including from experienced foreign managers.

Hermitage Capital Management, a minor Sberbank shareholder, made up its mind to stir up a scandal and accused management of misplacing $851 million somewhere or other. Foreigners' concerns can be understood easily: It goes without saying that foreign investors came to Sberbank not just because it is Russia's largest bank. Foreign investors want this bank (which holds up to 60 percent of private deposits) to run its financial activities properly and in a transparent way, bringing them the profit that they deserve. Foreigners even tried to explain the correct way of running the banking business to the banks management. However, according to the aforementioned allegation, Sberbank's advisory board ignores the "role of independent directors, which is then reflected in worsening of corporate management."

A Russian manager does not know what to do with "independent directors." Foreign businessmen should take account of local peculiarities. As was said above, the bank is traditionally considered to be a state bank, and the major goal of the bank is to solve state problems, not to make money.

Where did foreign shareholders' anger come from? The bank’s advisory board refused to discuss the suggestions that had been put forward by Hermitage Capital's director for corporate research, Vadim Kleiner, who had put forward several suggestions as how to improve the efficiency of Sberbank's activities.
In their statement, Hermitage Capital listed Sberbank's every sin: Sberbank subsidizes oligarchs, its expenditure structure is not competitive, its head office is not efficient, its service leaves much to be desired and its loans are unprofitable.

Specialists from Hermitage Capital calculate that Sberbank is obligated to pay $22.3 billion dollars upon depositors' request within six months. Yet, according to them, the bank was capable of receiving a profit of $11.5 billion (owing to its asset sales).

Such a verdict from "ndependent"experts would result in the dismissal of bank management in any other country. It would also result in bankruptcy, for the state would have to take upon itself the liabilities of Sberbank' inefficient management. Indeed, such a result would ruin the career of any banker from, say, Amsterdam. No one would open an account in a bank the administration of which had bankrupted it to the point where the state had to bail it out. However, Sberbank is a Russian bank that works on the basis of a different canon and a different mentality. Everyone knows the Russian mind-set does not tolerate anything connected with commerce, profit, surplus value and other such nonsense.

Hermitage experts maintain that long-term crediting of Sberbank's corporate clients is basically provided at the expense of short-term loans made by the population, and is not a result of the bank's fine work and high profits. In other words, Sberbank takes people's (depositors') money and gives it away to oligarchs.

Funny foreigners:They came to Russia to teach business to Russians. In Russia, they have always taken money away from the poor to give it away to the rich. This is what the entire history of Russia is based on: Two or three peasant rebellions and three revolutions in over 300 years were all, so to speak, no big deal.

Sberbank's press service did not keep mum and released a statement in response. The bank's official position was very simple: Its management doubted the competence of the experts who prepared the report. According to Sberbank's statement, its advisory board refused to consider Hermitage's analysis because it contained the following line: "The information used was obtained from open sources, which were not checked either by Hermitage Capital Management Ltd. or by any of its affiliated persons."

This means that Sberbank says that Hermitage can not guarantee the reliable and the objective character of the information that was used as the base of its conclusions. It is worth mentioning that Sberbank is not going to check the information of its minor shareholders either. Its press service said it was a "principal aspect."

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