Transcript ING Wholesale Banking

ING: Establishing Standards in Russia’s
Banking System
Russia-Netherlands Economic Forum
Alexander Pisaruk
General Director
ING Wholesale Banking Russia
November 2007
Russia: one of the leading emerging markets
• US$1.25tr GDP as of 2007 – the second-
Russia: a good mix of scale, dynamics, and wealth
20 000
largest after China in the EM world
South Korea
Czech Republic
• further economic expansion with an
average real GDP growth of likely 7% for
2007–09
GDP per capita as of 2006 (US$)
Taiw an
15 000
Saudi Arabia
Hungary
10 000
Mexico
Venezuela Malaysia
Argentina
5 000
South Africa
Brazil
• significant financial stability has been
Slovakia
Croatia
Chile
Poland
Peru
Colombia
Russia
• world’s third-largest FX reserves of
Romania
Turkey
Bulgaria
Serbia
Thailand
Egypt
Philippines
built up:
Kazakhstan
Ukraine
• stabilisation fund (10% of GDP) to
China
compensate for fiscal shocks in case
of an oil price collapse
Indonesia
India
0
0
2
4
6
8
10
12
• BBB+ sovereign credit rating from
S&P/Fitch
average GDP growth in 2000-2006 (%YoY)
Source: Federal State Statistics Service, Bloomberg, ING estimates
Wholesale Banking
more than US$440bn as of Nov’07
Slide 2
Russia is a stable environment for the market
RTS Index performance
The flow of portfolio and direct
investments into Russia
EMBI+ Russia spread
2500
2000
1400%
2007
(US$ 16.9bn
In 1H07)
1500
1000%
bp
Jan-00 = 100%
US$ 34bn*
1200%
800%
1000
600%
400%
500
200%
2006
0%
2000 2001 2002 2003
US$ 16.9bn
2004 2005 2006 2007
0
2000
Rouble vs. hard currency basket
2005
120%
2003
US$ 7.2bn
Jan-00=100%
US$ 9.8bn
110%
2005
2006
2007
95%
investment grade
BB-7
B+ 6
100%
stronger RUB
B 5
4
B3
CCC
90%
85%
2
80%
2001
2002 2003
2004
2005
Source: Federal State Statistics Service, Bloomberg, ING estimates
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2004
BB+9
BB 8
weaker RUB
105%
2000
2003
Credit Rating history (S&P)
11
BBB
10
BBB-
115%
2004
2002
A-13
12
BBB+-
125%
US$ 13.5bn
2001
Slide 3
2006 2007
2000
2001
2002
2003
2004
2005
2006
2007
Regulatory environment: past progress and further
trends
General
Financial markets
• The past and ongoing regulatory developments has
• Russian derivative market does not meet
made the Russian market more predictable at
present
•
•
•
•
•
Anti-money laundering
• Some weaknesses remain in the legislative
and regulatory environment for derivatives
in Russia
Deposit insurance system
• Netting legislation is not enforced yet
• More clarity with regard to accounting
Capital constrains
Development of RTGS system
and taxation
derivatives
Currency control liberalisation
• Adoption
of
transactions
of master
maximally
close
to
standards
Securities market
• Absence of a central securities depositary
• Lack of a centralized settlement and
with
agreements
international
• More clarity with regard to eligible
counterparties and eligible transactions
clearing infrastructure
• Lack of clarity and uniformity in the legal
• Creation of a benchmark floating rouble
environment
curve with committed market makers
• Securities lending is not legally recognized
in the local market
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the needs of domestic economy
Slide 4
ING WB’s activities to improve regulatory
environment
• ING is committed to contribute to further progress in the regulatory environment. The
establishment ING Russia is FATF compliant Basel II compliant internally by risk models and
organizational setup.
• Cooperation with regulators
• Participates in Basel II working groups
• Receives good feedback from inspectorate on internal control
• Widely responds to supervision requests about organizational setup of control functions: audit, risk
management, compliance
• ING is prepared to contribute more expertise to the project
• Regulatory environment observations
• Observed shift of the regulator’s focus to internal control framework
• Appreciates increased judgment powers given to management by new regulations
• Fully endorsed the establishment of dedicated inspectors of banks
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Slide 5
ING WB’s activities to improve the Russian financial
markets infrastructure
Financial markets
Securities market
Development of derivative instruments
Participation in working groups with regulators
and market players:
• Introduction of international derivatives standards
into
the
Russian
legislative
environment
(cooperating with ISDA , ISLA and European Bank)
•
•
•
•
•
•
• along with already achieved progress in the
legislative and regulatory environment, ING WB is
planning to broaden the set of its derivative products
• already in the coming future, ING WB is planning to
become a member of the derivative section of
MICEX
status of MosPrime:
introduction of the Foreign Nominee concept
introduction of partial and split voting
development of new regulations on registrar activities
amendments to the Law On Securities Market
status of account owners/holders (possibility to open
accounts for non-legal entities, ie pension funds and
mutual investment funds)
• securities lending
Creation of a benchmark floating rouble
curve
• we have been active in supporting the benchmark
creation of the Central Securities Depository
Participation in National Securities
Practice Group of ROSSWIFT on:
• implementation of ISIN codes
• usage of SWIFT for communication between market
• one of the first to incorporate the rate into its
products
• we act as a Calculation Agent in respect to the
participants
• adaptation of SWIFT formats to peculiarities of the
rouble bonds of EBRD with floating rates
Russian securities market
• ING WB is a member of NFEA (National Foreign
Exchange Association) with the right to vote
ING WB participates in working groups of NAUFOR, NFA, PARTAD, AERB, Central Bank, FSFM, Russian State Duma Banking Committee
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Market
Slide 6