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Yevgeny Titov: "It is important to prepare financial ground and build trust for the business of the two countries to bear fruit"
Chairman of the Far Eastern Savings Bank Evgeny Titov told the East Russia news agency about the prospects for cooperation between Russian and Chinese banks
- Yevgeny Viktorovich, in September, within the framework of the Eastern Economic Forum, a meeting of the Russian-Chinese Financial Council (RKFS) will be held. This will not be the first meeting in this format. What issues do you plan to discuss with foreign colleagues?
- Exchange of information between partners should be continuous. Distances and differences in time zones does not prevent us from being in the same information field. It should be noted that members of the RKFS exchange information not only during meetings, but also in working mode. At the new site in Vladivostok, we plan to discuss topical issues of cooperation. The RCFS includes representatives of the 49 banks of Russia and China. Despite the fact that the Council was formed only a year ago, its activities turned out to be eventful. During the meeting, we will summarize the work for the reporting period, discuss plans for the second half of 2016 of the year and 2017 of the year. My colleagues and I share information and analytics both in the banking industry and in general as the economies of our countries. During the investment road show, it is planned to present the largest investment projects and investors from China.
- Is China willing to invest in the Russian economy?
- The main trends in the Russian economy are now connected with the change in oil prices and the unstable position of the ruble. It's no secret that the cost of labor in Russia today is cheaper than in China, based on exchange rate differences. This situation opens certain opportunities for the development of local production, in particular, in the Far East. For the first quarter of 2016, the volume of payments for trading operations in the Far Eastern Savings Bank grew by 30% compared to the fourth quarter of last year. This testifies to a real revival of the economy and our external relations with foreign counterparts. Today the order of 70% of these operations is carried out by the Amur Region. We see that there is a change in the structure of the balance of transactions. If before we imported many goods, now a significant amount of goods are exported from the country and, in particular, from Blagoveshchensk - from territories that have a simplified visa regime.
A number of investment processes appear, such as cooperation in the Amur Region to finance construction projects for one of the oil refineries. This is a fairly large project, which is funded entirely by the Chinese side, and most of the loading of oil products will be carried out by China. At the same time, a part of the production will be localized, and the order in the territory of the Amur region will be about 50% of the goods. At the same time, the region will receive new jobs and high-tech production.
- Is there a reciprocal interest of Russian business? Domestic companies of which industries tend to cooperate with the PRC?
- By and large, everyone works. The level of wealth in China has increased. If earlier China was such a global producer, now it is becoming a global consumer of top quality goods. We all know the trends that have been in recent times when, due to the devaluation of the ruble exchange rate, our goods became much cheaper than in China. Export has improved. So, our entrepreneurs observe a heightened interest of Chinese consumers in their state of health. For example, in the Primorsky Territory there is a company that produces honey. She six months from local sales moved to 90% of exports to China.
- You have been working with the regional business for a long time. Share your observations of how far the Far East has become more experienced in working with complex financial instruments? Is the infrastructure in use that the banks invest in money and time?
“Three years ago, we actually began to create our divisions for work in global markets, which are engaged in transactions, the so-called global markets - complexly structured derivative transactions in the conversion business. At the start, in the first three months, we started working with 30 clients who used derivative transactions. Now 150 of our clients use these products in the Far East. Moreover, they belong to absolutely different market segments: these are both small enterprises and large companies with high turnover. Complex products become more understandable for business. We are now focused on optimizing our product line so that many things are done in one click. We already have many transactions structured according to the principle of one signature. Derivatives are now virtually ubiquitous. It is important to understand that the correct and competent use of such tools not only minimizes risks, but eliminates them. We had a case that I think is very revealing. A forward deal was concluded at the bank amid a sharp change in the exchange rate. The dollar then cost 80 rubles, and the client for six months continued to buy currency from the bank at a cost of 33-34 rubles. Under the forward contract, this client's business performance was simply unattainable. These six months were very difficult and decisive for many local companies. Unfortunately, not all businesses were shocked. But a timely decision and financial literacy helped the client win and gain a competitive advantage.
- Is it profitable for the Chinese side to attract credit resources in Russia?
- It all depends on what the company's sales structure. If the company plans to produce and market products entirely in Russia, revenue, respectively, will be in rubles. Against the background of significant volatility in the currency market, it is rather short-sighted to unbalance the currency market in terms of revenue and credit. If we change the currency of revenue and the currency of debt, then there is a risk of being in a difficult situation during the next rally in the financial markets. Of course, if the business structure implies a narrow sale of goods to China, then it is logical to acquire yuan.
- The previous meeting of the participants of the RCFS took place in Hainan. What task did the Forum on Innovative Cooperation, organized by the Chinese party, help to solve?
- The key topic that we discussed with foreign colleagues is the activities that can become a catalyst for the development of relations between Russia and China in general and trade relations in particular. Therefore, the issues of more active integration of Chinese business into our development tools in the Far East were discussed. Also, the opportunities of the Free Port of Vladivostok, and what problems the Chinese side now sees to activate relations in this direction, what advantages are needed, what they see as important steps that need to be taken to develop the economy. To the business of the two countries to bear joint fruit, it is important to prepare financial ground and build trust. And for this, a vital dialogue on a comfortable platform is important. Our delegation noted the high level of organization of the Forum. Chinese colleagues always have a very warm welcome.
At the meeting, together with the Fund for the Development of the Far East and Chinese partners, agreements were signed that imply not only theoretical prospects, but also practical steps. For example, synchronization of actions of clients of two large banks. On the territory of the Far East is Sberbank, in the territory of the nearest Heilongjiang province is Harbin Bank, which is the leader of the northern province of China. Within the framework of this direction, we are carrying out a number of activities that will be aimed at justifying the customers of the two banks.
- Do you need it for customers?
- Yes, without a doubt. Over the years of working with business representatives, we noted that often a stumbling block in relations between partners from different countries is the lack of trust and mutual understanding. Banks are the guarantor of reliability. Create a trust factor. It can be called the main element for business, but not the only one. It is important to create a comfortable settlement and payment infrastructure. I mean mutual accounts. At present, for Harbin Bank, we open correspondent accounts. In the near future, they will appear to serve customers of seven more banks in China. An effective chain of correspondent accounts will make payments between channels and double their price.
- By the way about efficiency. Most recently, within the framework of the Russian-Chinese Expo in the city of Yekaterinburg, the use of the remote banking service Sberbank FinLine was launched. Tell us, what is its peculiarity?
- It's safe to say that instant payments between Russia and China have become a reality for the business of the Far East. We signed an agreement with the Bank of Harbin. It opens up wide opportunities for the development of settlements in national currencies for businesses in Russia and China. Our clients, just like the clients of Bank Harbin, pay great attention, above all, to the speed, transparency and cost of payments. High technology, our partnerships with the Asian financial world help to ensure this. Already, the geography of services provision is practically unlimited. For mutual settlements, the Sberbank FinLine system was chosen - this is one of the most modern solutions. It will help to conduct a two-way exchange of payment documents and information between Russian and Chinese banks, as well as receive the necessary set of online services in real time.
- The share of China in the foreign trade balance of the Far East in a short period of time has grown to 30%. How has the structure of payments in settlements between countries changed?
- If at the beginning of 2015, 98% were settlements in dollars, and about 2% - in national currency, then at the end of last year the structure changed. Transactions in dollars accounted for 90% and 10% in national currency. The growth rate of settlements in national currencies in 2016 doubled in the first quarter of this year, and the ratio of payments in rubles and yuan is 50% to 50%. These figures highlight the need to develop the financial infrastructure for faster local currency transactions at lower costs.
- If we talk about the corporate business of Sberbank in the macro-region, what are the main tricks you can call?
- The key strategy is focused on the creation of infrastructure, relevant products and service tools to stimulate the attraction of capital to the Far East. The format of the territories of advanced development has a different information background. But in general, this is a fairly balanced and understandable toolkit that provides competitive conditions for doing business. If we talk about the logistics of funds, then everything depends on the payment infrastructure. Inflow of capital implies cross-border payments. It is necessary to solve the problem of the value of money, because it inhibits the development of derivatives markets. It is important to concentrate on servicing the financial flows that are already being received and will flow into the macroregion in the near future. Just do not need to think that banks are only interested in short-term relationships. The future is only with long-term relationships with partners and customers. My colleagues and I want to be understandable for each other.
- This is precisely one of the missions of the RKFS. Are there any special initiatives that help rapprochement?
- Yes, we are already actively implementing them. During the meeting in Moscow, the President, Chairman of the Board of Sberbank German Gref and Chairman of the Board of Directors of the Bank Harbin Guo Zhiwen signed an agreement on the exchange of trainees. With Harbin Bank, we are long-standing partners, it was with him that we opened one of the first correspondent accounts. Exchange of trainees will help each of the parties to learn the cultural characteristics, customs and business model of their partner.
This summer, representatives of Bank Harbin completed a week-long internship at the Far Eastern Sberbank. During the gemba, colleagues from the Middle Kingdom got acquainted with the specifics of doing business in Russia. During the exchange of experience, they discussed the difference between the approaches to lending and project financing of enterprises in the two countries. The guests from the Bank of Harbin learned what opportunities Russian business has to work in global markets, and what needs of Far Eastern corporations are met through the services of Sberbank. The exchange of experience in the implementation of trade finance instruments and correspondent relations turned out to be especially relevant: this banking service allows regional businesses to receive financing from funds raised by the bank in the international market, which makes it possible to reduce the final cost of financing for the client. By the way, today we see an increase in the demand for trade finance in the commercial markets of China. In the first half of 2016, the volume of letters of credit with post-import financing in yuan increased by 80% compared to the same period last year, with a threefold increase in the number of transactions.
- During the training of the representatives of the partner bank from the PRC, the emphasis was only on studying the business model? It is this experience that helps to better understand and understand each other?
- The "full immersion" effect is important. The guests had the opportunity to plunge into the inner life of our bank, learn about its corporate culture, philosophy and values, customer-centric business model. By the way, colleagues from the Harbin Bank during their internship at the Far Eastern Sberbank noted the similarity of the corporate cultures of the two banks. The mentality of people from different countries may differ, but common values bring us closer together. Such an international exchange of experience between financial institutions is a good and necessary practice. We learned a lot of new information, like our colleagues from the Bank of Harbin. They were especially impressed by the technical modernization of banking processes - the way to the client's heart now lies through high technologies. We agreed, of course, to meet again - only on the other side of the Amur.
- Do language barriers interfere with communications? If banks move to settlements in the national currency, maybe soon the communication between the partners will also be in the national languages?
- Dentists joke that language barriers are just teeth. Many of our employees speak Russian, English and Chinese. It's high time for me and my colleagues - heads of banks included in RKFS - to master the language of partners. It's never too late to learn. Especially from each other. Art can also help with this. We had a joint calligraphy lesson with representatives of the Harbin Bank under the strict guidance of the master: foreign colleagues wished us luck in Russian, and we wished them luck in Chinese. I am sure that the practice of exchange of experience will continue, becoming a guarantee of reliable partnership relations between banks-members of the RKFS. Our cooperation will not leave any barriers for business.
I am convinced that a deep understanding of one of the most ancient and great cultures on earth will play a huge role in interacting with Chinese colleagues. I understand that in order to understand all the subtleties, you need to be Chinese and know the whole multi-thousand-year history, but being interested in China as a whole, representing China in the person of one person, in which all the diversity of civilization is collected, you clearly understand the fundamental values of these people - respect for each other , respect for elders, mutual assistance and kindness. We know that these people will reciprocate their honesty and open partnership. I am also convinced that they, looking at us, find a lot in common in history. Despite the differences in cultures and traditions, our peoples adhere to the identical root foundations of relationships between people. Our civilizations are very similar in that we had to overcome repeated, sometimes disastrously destructive influences from the outside. More than once, standing at the edge of the abyss, we found the strength and wisdom to overcome all these hardships and go our only true path, not for individuals, but for an entire nation. History makes us stronger, no matter how they try to belittle our potential. A tandem of two strong people, based on the right foundation, always gives an appropriate result. The tandem of the two largest corporations that want and can fruitfully cooperate, based not only on numbers, but also on understanding, respect - in addition to material results, will bring even more important benefits. Strong friendships are born in such cooperation. With each task overcome, people will open up more to each other and want to experience this feeling again. A huge opportunity opens up before us - in fact, and not in words, to become closer. The prospects for partnerships are literally endless. Realizing with which approach we start, it is breathtaking with anticipation of the power of their development. There are all conditions to become a historical example of synergy for contemporaries and future generations.