Belarus banking sector anticipates consolidation and increased Russian influence

On November 26^th the purchase of Belrosbank by Russian Alfa-Bank was announced.

Russian capital is the most likely buyer of the Belarusian state property. It needs banking organizations to service the needs of the acquired assets. The requirement to increase the regulatory capital for Belarusian banks implies additional financial resources, thus, a number of banks may be purchased by the Russian capital.

The Belarus’ banking system counts 32 banks. More than half of its assets are concentrated in the two largest banks – Belarusbank and Belagromprombank. Four of the five largest Russian banks have branches in Belarus. Assets of any of the five largest Russian banks exceed assets of the entire Belarusian banking system, therefore Russia could influence Belarusian banking sector fairly easily.

Belarus, in compliance with its commitments to the Anti-Crisis Fund, agreed to annual sales of state property worth USD 2.5 billion. It is implied that the main buyers of Belarusian enterprises will be Russian companies. In order to manage and fund the purchased assets, it would be desirable for Russia to have appropriate financial structures, such as banks. For instance, purchase of Beltransgaz could serve as an example. Belgazprombank, where Gazprom is the main shareholder, is successfully operating in Belarus, and has also bought Beltransgaz. One of the bank’s tasks is to organize and manage payments for gas supplied by Gazprom.

According to the NBB regulation No 522 of October 30^th, 2012 a bank’s minimum regulatory capital as of 1^st January 2014 must be not less than EUR 15 million, as of January 1^st, 2015 – at least EUR 25 million. On October 1^st, 2012 less than half of the Belarusian banks met the EUR 25 million standard. In the future, banks will require substantial external financial inflows to meet this standard, and a number of banks will be forced either to consolidate or to change owners. These changes can draw major Russian financial institutions into the Belarusian market, or open the possibility for mergers with Belarusian businesses as part of the expansion process.

Thus, on the one hand, the Belarusian market is highly risky for European banks, the country should not anticipate large and well-known banks to come and invest in Belarus. On the other hand, the new regulation concerning regulatory capital will force small banks either to find additional resources, or will make them more complaisant in talks with Russian capital regarding mergers or sales, given that the latter is the most interested in being represented in Belarus.