Author: Dr Vasily Vysokov, Chairman of the Board of Directors of Center-invest Bank
On 23 September 2015 the Bank of Russia registered its report on the additional issue of ordinary shares in Center-invest Bank, placed through a closed subscription. The bank’s founders, Dr Vasily Vysokov and Mrs Tatiana Vysokova, participated in the subscription. As a result of the new share issue, Center-invest Bank has capital of RUB10.8bn.
Why? Now is a good time for investment, and the best investment strategy is to invest in your own health, education and business, and in infrastructure for your business. We know our own business, global trends, and the local market very well. Since 2009, when speaking at conferences, meetings and forums, I have concluded with the words: “Banking is dead. Long live banking! ” Today, almost all of the banking conferences use this as a title for discussion panels. The issue is not just the growing role of information technologies, but the transformation of the very model for converting savings into investments. Transformational banking means sustainable solutions to today’s challenges in the interests of future generations. And this is Center-invest Bank’s strategy.
Buying, selling and managing risks? So-called “bankers” often assert: “We buy and sell risks.” In a crisis, the traditional speculative banking model results in a spiral: risks increase — the bank raises rates — the borrower takes out a more expensive loan for more risky projects — the borrower defaults — the bank records a loss on its balance sheet — the bank increases the risk level. In contrast to speculative banking, transformational banking requires analysis and concrete risk reduction solutions from the bank and its customer. This means that the bank can reduce the loan interest rate, the customer can complete their projects successfully, and the bank can get its money back with a small profit, without loan loss provision expense. In a challenging social and economic environment, in 1H 2015 Center-invest Bank increased its loan portfolio to RUB78.7bn (+3%, IFRS), and retail deposits to RUB43.3bn (+15%, IFRS). Our sustainable development strategy has enabled us to maintain a high quality loan portfolio (provisions: 5.7% under IFRS, 5.01% under RAS) and a sustainable margin (3.6%).
Trends in mega-regulation of the financial markets. Countries with considerable experience of financial crises have resorted to the same kinds of strategies as were used after the Great Depression, notably: prohibiting banks from using customer deposits for speculative transactions, and separating out bank lending and investments by risks, rates and maturities. Responding to global trends in banking regulation and the new Basel Committee standards, Center-invest Bank already separates out these transactions, which allows us to avoid additional risks.
Happiness lies not in money, but in the velocity of money. Modern information technologies mean that customer account balances cannot be viewed as resources for investment. Moreover, the velocity of money will only increase. If the velocity tends to infinity, then the quantity of money will tend to zero. Electronic money will come to replace gold reserves, and E-money will require a new E-regulator. Center-invest Bank has its own processing centre (the only one in southern Russia), and is actively introducing modern payment methods: cards, online and mobile banking, and chips and contactless payment devices embedded in new form factors and accessories.
The collective goods economy. With traditional goods, prices help to balance supply and demand. These transactions do not require bank loans: if a seller and a buyer trust each other, it will suffice to use discounts and payment in instalments. However, when it comes to collective goods (e.g. schools, hospitals, roads, apartment building infrastructure), which everyone requires, but no one wants to pay for, it is necessary to involve banks. Case study: Under the Russian Law on Capital Repairs, the owners of apartments in multifamily residential buildings have to pay monthly contributions to a capital repairs fund. This fund is used to renovate buildings in accordance with a regional capital repairs programme. Rather than having to wait for the scheduled renovation, Center-invest Bank customers can take out a loan and renovate their buildings straightaway. They pay the same contributions as before, but the money goes towards the loan repayments. Living in a renovated home is the best way to protect the money in a capital repairs fund from inflation.
Where should people put their money? Market volatility is spurring the population to purchase the currency of countries which until just recently were known as “potential” enemies. And then we see a drive to attract foreign investment. Working together with international financial institutions for many years now, Center-invest Bank has in effect returned to southern Russia the money invested in developed countries by our compatriots. The region’s investment appeal is such that it is more advantageous to invest in domestic projects than in foreign currency.
Center-invest Bank’s ecosystem. Our formula for success is: “Center-invest: it’s the best!” During the years of reform the bank established the best ecosystem in the best region, southern Russia, with the best customers, partners and employees. We have successfully localised international best practice in corporate governance; environmental and social responsibility; strategic vision; assets and liabilities management; integrated reporting; risk management in accordance with Russian and international standards; audit and compliance; information systems; customer, investor and public relations; and staff training and development. Center-invest Bank has the best products and services for small business, energy efficiency, agribusiness, and retail customers. We also run effective educational projects for future generations: the “Enterprise for All” portal has been visited by more than 13,000 users, 4,000 of whom have successfully completed the online course in the basics of entrepreneurship; to date, over 20,000 students have entered the annual scholarship competition run by the Endowment Fund for Education and Science in the Southern Federal District; over 7,000 people have visited the Financial Literacy Centre in Rostov-on-Don (joint project with Southern Federal University); and in June of this year more than 1,000 people took part in the Positive Economy Forum organised by Center-invest Bank.