Regional banks facing a serious competition challenge
This is a reason for which small regional banks will face an increasing difficulty in competing with, firstly, large regional banks and, secondly, federal banks, because large banks have, among other things, easy access to low-cost financing from the central bank and to the interbank lending market.
Additionally, many large banks have a very high level of information technologies which small banks, including regional ones, can hardly afford.
Small banks often show inefficient performance not only due to outdated technological solutions, but also insufficient level of education and knowledge of the personnel. The foregoing is sufficient for small regional banks to yield leading positions at the regional and federal levels. Indeed, both the complex situation in the country and the drastic contraction in economic growth rates have a strong impact on small regional banks.
Bankers' collective opinion is that regional banks can hardly compete for major customers, customers from the machine-building industry, defense industry. It is banks with large equity and access to low-cost financing that can provide services to such customers.
Regional bankers note that the provision of services to small and medium-sized businesses is a most promising line to develop the banking business. This is very important, because small and medium-sized businesses is a pillar of economic growth in the country, and they could be recipients of the money from credit institutions, providing a strong, positive effect on the economy.
Speaking of retail lending, this area is already facing the problem of heavy credit exposure. Today, many banks, even large ones, report that the quality of credit portfolios has deteriorated.
This is a reason why small and medium-sized entrepreneurship is a key prospective line of business development, as based on the estimates of both regional bankers and the academic community. It refers not only to lending, but also settlement and cash services, the entire range of financial services which are highly sought by small and medium-sized businesses.
Speaking of bank fees, no one could expect them to grow without developing infrastructure, payment systems, introducing advanced payment technologies. Banks also can gain a strong competitive edge by investing in development in this areas.
Yury Kondrashin, expert at Gaidar Institute.
The comments are based on Yury Kondrashin's interview to Bankir.ru