The Chairman of the Board of Directors of Center-invest Bank, Dr Vasily Vysokov, took part in a recent IFC Financial Institutions Group Knowledge Forum. Dr Vysokov presented a paper entitled “Transformational Banking: made in Russia” and spoke about Center-invest Bank’s experience of working with IFC.

Center-invest Bank and IFC have worked together for over a decade. This co-operation has been a success story that can be summed up as: CENTER-INVEST: IT’S THE BEST!

What is special about Center-invest Bank:

• the best ecosystem (region — southern Russia, our partners, customers and staff);
• the international best practice which the bank has localised successfully together with IFC.
• By providing the best products for small business, energy efficiency projects and agribusiness, the bank is able to hold leading positions in these segments of the Russian market;
• Our best practice in nurturing a new generation for the bank’s ecosystem has been an important factor in southern Russia’s sustainable economic development. Thousands of young people take part in the bank’s educational projects and this guarantees successful transformations.

When we compare it to the other business models (speculative, state-owned and Islamic banking), sustainable banking stands out as innovative and responsible. Experience has shown that the term “transformation” means transition from crisis A to crisis B. A transformational business reflects the new realities: non-stop transition in non-stop crises. But such a development requires non-stop, creative, responsible solutions in the interests of current and future generations.

Our new projects with IFC are concerned with the transformation of the traditional economy into an economy of collective goods and services. Today, it is not enough to produce a product; companies must create and support infrastructure for consumption of the product. Although the nature of collective goods and services is such that everyone requires them, no one wants to pay for this infrastructure. The inelastic demand for collective goods and services gives rise to problems involving unsuccessful attempts to regulate tariffs and prices for such products and services. This means that increased demand cannot be met, and the result is the breakdown of the existing infrastructure. By introducing new approaches a balance can be achieved between increased demand and the quality of collective goods and services. At the same time, a balance between supply and demand will only be achieved in the long term.

Therefore, the economy of collective goods and services is a striking example of transformations: non-stop, creative, responsible, sustainable solutions today for generations that will consume these goods and services in the future.

Today the banking business is also acquiring features of collective goods and services. New approaches mean that short-term individual deposits cannot be used to implement long-term projects, and payments and investments must be separated out, taking into account the durations, risks, tariffs and other types of income. Increasingly, money must be looked at not as a reserve or a flow, but as a continuous cycle. Governments are usually afraid, and students are taught, that growth in money supply leads to growth in inflation. Modern approaches allow for a different interpretation of this formula: if the velocity of money tends to infinity, then the quantity of money in the economy will tend to zero. A dramatic increase in the use of e-money, which will require the creation of E-regulators on the ruins of central banks, is already on the horizon.

The transformation of the financial markets will follow tradition: “Banking is dead! Long live banking!”