Evgeny Titov: “To enable the businesses of two countries to be jointly fruitful, it is important to prepare the financial groundwork and nurture trust”
Evgeny Titov, the Сhairman of the Far Eastern Bank of Sberbank PJSC, spoke to East Russa News Agency on prospects of cooperation between Russian and the Chinese banks.
– Evgeny Viktorovich, as part of the Eastern Economic Forum, a meeting of the Russian-Chinese Financial Council (RCFC) is expected to take place in September. This will not be the first meeting in this format. What questions would you like to discuss with your foreign colleagues?
– Information exchange between partners must be continuous. Distances and differences in time zones do not prevent us from being in a single information environment. I would like to note that members of the RCFC exchange information not only during meetings, but also on a day-to-day basis. We plan to discuss important cooperation issues at this new platform in Vladivostok. RCFC already includes the representatives from 49 banks of Russia and China. Despite the fact that the Council was formed only a year ago, it has already achieved a great deal. During the session, we will summarize our work for the reporting period, will discuss our plans for the second half of 2016 and the year 2017. Together with our colleagues, we share information and analytics both on the banking industry and in general on the economic conditions of our two countries. As part of the investment roadshow, we plan to made a presentation of the largest investment projects and investors from China.
– Do businesses of the People’s Republic of China invest willingly in the Russian economy?
– The main tendencies in the Russian economy are related now to changing oil prices and the unstable position of the ruble. It is no secret to anyone, that the cost of labor in Russia is now cheaper than in China, based on the exchange rate differences. This situation provides certain opportunities for development of the local manufacturing sector, in particular in the Far East. In the first quarter of 2016, the volume of payments involving trade operations in the Far Eastern Bank of the Sberbank of Russia grew by 30%, in comparison to the fourth quarter of the previous year. This bears evidence of a real revitalization of the economy and our external connections with foreign counterparties. Today, around 70% of these operations are performed in the Amurskaya Oblast. We see that the structure of transaction balances is changing. While earlier we imported many goods, now significant product volumes are being exported from the country and, in particular, from Blagoveschensk – from those territories that have a simplified visa regime. There are new investment processes occurring, such as interaction in the Amurskaya Oblast with regard to financing of a project involving the construction of one of the oil refineries. This is quite a big project, which is fully financed by the Chinese, and most oil product shipments will also be performed by China. Some products will be localized; it is planned to sell about 50% of the products in the territory of Amurskaya Oblast. Besides this, the region will get new jobs and a high-tech production site.
– The previous meeting of the participants of the RCFC took place in Hainan. Forum of Innovation Cooperation was organized by the Chinese side. What task did it help to solve?
– The key topic that we discussed with our foreign colleagues is the measures that may become a catalyst for developing Russia-China relations in general, and trade relations in particular. For this reason, we discussed the issues involving more active integration of Chinese businesses in our development tools in the Far East. Also we discussed the possibilities offered by the Free Port of Vladivostok. We understand what activation of relations in this area, what advantages are required, what steps need to be taken for the development of the economy. To enable the businesses of two countries to be jointly fruitful, it is important to prepare the financial groundwork and nurture trust. To do this, face-to-face talks at a convenient platform are considerable. Our delegation noted the high level of organization of this Forum. The Chinese colleagues always give a very warm welcome. At the meeting, together with the Fund for the Development of the Far East and the Chinese partners, we signed agreements that have not only theoretical prospects, but make provisions for practical steps to be taken as well. For example, synchronizing the actions of clients of the two large banks. In the territory of the Russian Far East, this is Sberbank, in the territory of Heilongjiang, the province that is the closest to us, this is the Harbin Bank, which is a leader in China’s northern province. In this area, we are organizing several activities that will be aimed at introducing clients of two banks to each other.
– Do the clients need this?
– Yes, no doubt. During many years of work with business representatives, we noted that a lack of trust and mutual understanding in relations between partners from different countries is often a stumbling block. Banks act as reliability guarantors. They create the factor of trust. This can be called the main element for business, but not the only one. It is important to form a comfortable settlement and payment infrastructure. I mean mutual accounts. Now we are opening correspondent accounts for the Harbin Bank. In the nearest future, they will be opened to serve the clients of another seven banks of China. An effective chain of correspondent accounts will allow making payments between the channels, and will make them cheaper twice.
– Speaking about efficiency. Quite recently, Sberbank FinLine remote bank service system was started in Yekaterinburg as part of Russia-China EXPO. Please tell us why it is so special?
– I can say with confidence that instant payments between Russia and China have become a reality for the Far East. We signed an agreement with the Harbin Bank. It provides extensive opportunities for development of settlements using national currencies for businesses of Russia and China. Our clients, just like the clients of Harbin Bank, pay great attention mostly to speed, transparency and the cost of payments. High technologies and our partner relations with the Asian financial world help us ensure this. Even now the geography of the services is almost unlimited. Sberbank FinLine system was chosen for mutual settlements – it is one of the most modern solutions. It will help perform bilateral exchange of payment documents and information between the Russian and the Chinese banks, and obtain the necessary set of online services in real-time mode.
– China’s share in the foreign economic trade balance of the Far East in a short time has grown to 30%. How has the structure of payments in settlements between the two countries changed?
– While in the beginning of 2015, 98% were payments in USD and 2% were national currency payments, this structure changed by the end of last year. Dollar transactions amounted to 90% of the market, while 10% were made in the national currencies. The rate of growth of settlements in national currencies in 2016 accelerated in the first quarter of the current year by 100%, while the ratio of payments in rubles and yuans is 50% to 50%. These numbers highlight the necessity to develop the financial infrastructure for faster transactions using national currencies with lower costs.
– One of the missions of the RCFC is strenhthening relations between the partners. Are there special initiatives that contribute to bringing the parties closer?
– Yes, we are already actively implementing these. During a meeting in Moscow between German Gref, the President and Chairman of Sberbank, and Guo Zhiwen, the Chairman of the Board of Directors of Harbin Bank, an agreement on intern exchanges was signed. We have been partners with Harbin Bank for a long time now, it was with them that we opened one of our first correspondent accounts. The intern exchanges will help each party learn the cultural peculiarities, customs and business models of their partners. This summer, representatives of Harbin Bank completed a week-long internship in the Far Eastern Bank of the Sberbank of Russia. In the course of experience exchange, they discussed the differences when it came to corporate lending and project financing approaches in the two countries. Guests from Harbin Bank learned what capabilities Russian businesses have for global market activities, and what demands of Far Eastern corporations are implemented through Sberbank services. Especially relevant was the exchange of experience in implementing trade financing tools and correspondent relations: such banking service helps regional businesses obtain financing out of the funds attracted by the bank in the international market, which provides an opportunity to reduce the final financing costs for the client. By the way, today we are observing growth of demand for trade financing in China’s commercial markets. In the first half of 2016, the volume of the letters of credit with post-import financing in yuans rose by 80%, in comparison to the same period last year, while the transactions grew by three times.
– During the internship of representatives of the partner bank from the People’s Republic of China, was emphasis made only on studying the business model? Does only this experience help to learn about, and understand each other better?
– The “full immersion” effect is important. Guests had an opportunity to experience the internal life of our bank, they learned its corporate culture, philosophy and values, and the client-centric business model. By the way, our colleagues from Harbin Bank during their internship in the Far Eastern Bank of the Sberbank of Russia noted the similarity of corporate cultures of the two banks. Such an international experience exchange between the financial organizations is a good and useful practice. We obtained a great deal of new information, and so did our colleagues from Harbin Bank. They were especially impressed by the technical upgrade of banking processes – the way to the client’s heart is now through high technologies. We certainly agreed to meet again – on the other side of the Amur.
– What about the language barriers? Do they pose a problem for communication? If banks are moving towards settlements in their national currencies, is it possible that interaction between partners will also be carried out in the national languages soon?
– Many of our employees speak Russian, English and Chinese. It is high time that I, and my colleagues, the heads of banks that are part of the RCFC, master the partner’s language. After all, it is never too late to study. Especially, from each other. Here, art can help. We and the representatives of Harbin Bank had a calligraphy class under the thoughtful guidance of a master: the foreign colleagues wished good luck in the Russian language, and we to them – in Chinese. I am sure that the practice of experience exchange will continue and will become a guarantee of reliable partner relations of the member banks of the RCFC. Our cooperation will leave no barriers for businesses. Despite the differences in cultures and traditions, our peoples rely on identical basic foundations of human relationships. The tandem of two largest corporations that want to and can cooperate fruitfully, based not only on the numbers, but on understanding, respect – in addition to material benefits, will also produce a more important benefit. This cooperation results in firm and friendly ties. In front of us is opening a huge opportunity to become closer – in reality and not only in word. The prospects of partner relations are limitless, and this is not an exaggeration. Realizing what approach we are starting with, makes thrilling the anticipation of the power of their development. There are present all prerequisites for this to become a historic example of synergy for our contemporaries and for future generations.