The FINANCIAL — “Banks should develop interesting deposit products and also attract as many clients with current accounts as possible.
The most promising segment of the banking market in the Caucasus is retail banking,” said István Lengyel, Secretary General at the Banking Association for Central and Eastern Europe (BACEE), in an interview with The FINANCIAL.
BACEE Annual General Meeting – Banking & Business Forum 2011 (www.baceagm.eu) will be held on 15 June. Istanbul organizers and participants will focus on the question of how to ensure balanced development of the banking sector without creating new bubbles.
“We may say without exaggeration that the Istanbul Banking Forum is already a success,” István Lengyel said. “We have more than 150 participants from 15 countries. It will be a great gathering of bankers, investors and businessmen and I hope many people will join us from Georgia and the region.
At the Forum we shall focus on the question of how to ensure balanced development of the banking sector without creating new bubbles, which are the most promising banking products and how to strengthen interbank cooperation.”
BACEE was founded in 1996 with the goal of promoting business relations of its member banks with financial institutions of Central and Eastern Europe.
BACEE membership is open for all banks with good reputations which want to develop their business in “New Europe”.
To support business expansion in the CEE region which generally represents a higher risk than in developed economies, BACEE is providing information and analytical services on country and bank risk in Central and Eastern Europe.
BACEE provides consulting services to its CEE member banks which want to develop a more active presence in international markets. These services include suggestions regarding business policies, transparency, presentation of the banks’ documentation to foreign counterparts, pre- and post-rating advisory services, attraction of credit lines from foreign banks and international financial institutions and preparation for sale to foreign investors.
BACEE may help member banks to enlarge their contacts with foreign banks, potential creditors, investors and international financial institutions.
“For one of our members we helped to open their first account in EUR in the EU (in a bank not affiliated with CIS-based banks), in other cases we helped to find creditors in a syndicated loan deal for an additional 1 million EUR, open new and enlarge existing bilateral credit lines. Of course there are no miracles, it only works if otherwise the borrowing bank is reasonably transparent and in good shape,” István Lengyel said.
At the moment we have only one Georgian bank in BACEE and feel sorry about that. This bank is the Georgian subsidiary of the International Bank of Azerbaijan and they joined only 3 months ago. We hope that we shall be able to help this bank to attract more partners and financing from the EU and Central and Eastern Europe, including trade finance lines. Of course, we would be happy to work also with other Georgian banks.”
Q. Which segments of the market are more attractive for Georgian banks and the banks in the Caucasus? It is known that you provide them with in-depth analysis of separate segments of the market.
A. We have prepared segment analysis so far on markets in Central and Eastern Europe among others by the request of foreign banks interested in enlarging their activities in the region. Due to the short history of membership of IBA Georgia, we have not yet received such a request from them.
The most promising segment of the banking market in the Caucasus is retail banking, where we feel there are very good opportunities for growth. In this respect I should like to refer to our agreement with the London-based Lafferty Group on offering comprehensive education for retail bankers all over Eastern Europe and the Caucasus.
Q. How about the banking products in general, meaning the trend in CIS, how different are they; do they change according to the demand of customers?
A. I think that Georgia and other countries of your region have an excellent chance to avoid mistakes made by banks in developed economies and thus create a vibrant and stable banking sector. A few comments (and this also relates to products). We have seen the problems created by unilateral focus on lending growth (in Kazakhstan, the Baltics) financed from abroad.
Thus my first point is that banks should develop interesting deposit products and also attract as many clients with current accounts as possible.
My second point is that banks should keep their control of money transfers. In many countries of your region non-bank service providers flooded the market with payment terminals offering different services. It is dangerous for banks to lose control over payment flows as they also lose information on their clients’ payment turnover and habits. If a client comes for a loan and the bank has no payment history, the risk increases enormously!
Q. How about Operational Risk Management in the Post-Crisis Period – are banks doing what is required, meaning audits etc, in order to avoid another crisis like there was in 2008?
A. I am afraid that management of operational risks is still underdeveloped in our region and is often underestimated by banks’ management. There is an increasing risk of data phishing, data loss, fraud and other similar problems to be addressed. BACEE pays special attention to this subject; we organize a yearly Operational Risk and Fraud Conference and hold regularly trainings on op. risk.
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