OREANDA-NEWS. Opening remarks by Prime Minister Dmitry Medvedev:

Good afternoon, colleagues. We meet fairly regularly to discuss the current situation and the banking sector’s prospects. As we agreed some time ago, today we will focus on policy issues, including bank liquidity and loans to the real sector of the economy. Large and not so large industrial, agricultural and other businesses have repeatedly asked me to address this issue.

The availability of loans is a prerequisite for technical modernisation. Manufacturing and infrastructural businesses need low-cost and long-term funding, which is crucial for the implementation of major investment projects. Of course, as we try to support macroeconomic stability and curb inflation, we must not forget about economic growth based on industries rather than oil and gas exports.

The policy priorities established by the Government include increasing banking sector assets to 104 trillion roubles. In February, the Government approved a programme for expanding the financial and insurance markets and for creating an international financial centre. I hope that major banks and other financial institutions present here will take part in this work. As for the performance results, the banking sector did quite well in 2012. The assets have grown by about 19%, or about 50 trillion roubles.

As of January 1, the total capitalisation of the Russian banks exceeded six trillion roubles. The total revenue of lending institutions increased by 20%, or one trillion roubles. Loans grew by 19%, or 4.4 trillion roubles. Non-financial organisations received disproportionately smaller amounts of loans, with an increase of over 12%, which is about half of the amount that they received in 2011. Lending to individual borrowers is up by 39.4%. I would like to hear what you have to say about this situation. In fact, we have discussed this issue at Government meetings.

Breaking it down by industries, transport and communications, as well as mining operations, saw the greatest increase in lending, of about 30%. Lending to the manufacturing industries, agriculture and forestry has contracted, which, of course, is cause for concern.

The gap between the loan costs that borrowers are prepared to cover and the interest charged by the banks remains a serious problem that everyone is talking about. In order to improve the competitiveness of key industries, the state assumes a portion of the credit risk by providing guarantees or by subsidising interest rates, thus making loans more affordable for borrowers. However, we also know that long money for businesses is in short supply, which is also a long-standing problem.

This problem is directly related to the investment climate. We have discussed this issue many times. We have adopted all kinds of documents, such as roadmaps, that are supposed to resolve it. A lot depends on the quality of regulations in this sphere. It should contribute to greater availability of loans, mitigate risks and build trust among market participants.

Bank supervision and oversight is another issue. By the way, Russia has put this issue on the G20’s priority list. It is imperative that we create conditions that are conducive to better quality of corporate governance, transparency of lending operations and detection and suppression of all kinds of semi-legal schemes and all other problems plaguing this sphere.

I have just read in a paper that the level of fraud at banks in Dagestan is undermining the stability of the banking system. If this is the case, then it should be dealt with, it’s a crime. We have seen other, similar instances recently as well.