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What changes will occur in the Russian banking system within the next five to seven years? The main trend is the consolidation of banks. When the most acute period is over and the quality of assets is more fully understood, the financial position of the main borrowers will improve, and banks will consider consolidation. Substantial capital is needed to work with good borrowers and large volumes, but if it cannot be gained through additional equity injection, the least that should be done is combining the existing banks with existing capital, and consequently, reducing the costs through volumes and more efficient banking operations. Even large Russian banks – especially bearing in mind the weakened ruble – look very small against the background of Western and Asian colleagues.quickwill In general, government-owned banks will take over an ever-greater share of the market. This is an obvious fact. In terms of volume, the private players will shrink, but, in my opinion, will not disappear. They will find a niche in which they will be more effective than the government banks, due largely to sectoral, regional, and client specialization. There is room for competition. If a government-owned bank works inherently well with major clients but does not always pay enough attention to medium-sized ones, the smaller banks will be more attentive and serious about this group of customers and may specialize in a particular industry, such as project financing. For business, this is a big plus. As for foreign banks, it is unlikely that they will try to increase their share of the Russian market, as long as we haven’t reached stable GDP growth.What changes would you single out as positive since entering the period of economic turbulence? First of all, the banks have started to manage their costs better. We can see this from the experience of Absolut Bank. Secondly, most of them have dramatically revised their risk models, making them more conservative. Finally, they’ve started paying attention to new technologies and the opportunities for fee income. What factors, in contrast, impede the financial sector? First of all, the financial situation of the borrowers, both individuals and legal entities. Secondly, a rather low justifiable demand for loans. Today, it is difficult for the banks to look for borrowers, especially in the corporate segment. There are no longer that many of those who they really want to loan money to. Naturally, the demand for such borrowers has grown. In other words, it is difficult to get through to good borrowers, and the heavily competitive pricing conditions remain in place. The majority of corporate borrowers, by contrast, have not seen too many favors from the banks – they are unable to refinance and have to rely on their own strength.