Dmitry Leus: "I see great potential in the

revival of small and medium-sized businesses

in the Russian regions."
- This is open for debate. The crisis has also shown that repayment shortfalls have only slowly
increased in the segment of consumer lending. At the same time, corporate creditors have had
recourse to several tricks such as automatic roll-overs in order to hide away their repayment
difficulties.
- Dmitry Leus: I agree with your observation. Every credit decision happens against the background of a
banks financial risk management.
Bank disposes of a strict system for financial risk modelling. Every day, we receive approximately 2500
new credit requests from private individuals. Among all these requests, only about 18% receive final credit
approval. In addition, repayment shortfalls of up to 60 days are addressed by our debt collection services.
The latters collection strategy is continuously being adapted to prevailing market conditions. For
example, there existed a period when we completely stopped lending to individuals under the age of 25,
as we observed a specific age-related difficulty when it came to repayment discipline.
Furthermore, our analysts are monitoring Bank s credit portfolio on an ongoing basis. We provide RUB
1bn of finance to the Russian population every month, which constitutes a relatively small amount. On the
other hand, it is just enough to subject our credit portfolio to a thorough analysis and take ad-hoc
decisions when needed. In light of Bank s 70 branches across Russia, I may add that working in the
Russian regions has proven easier than in the capital, as loan repayment rates have historically been
higher in the periphery. In total, our current private-loan default rate amounts to only 6 percent.
In contrast, in the realm of small and mid-size businesses we have so far practically not seen any arrears
at all, which may be due to the fact that we have just entered this market. Thanks to our cautious
approach to risk, I am convinced that our default rate in this segment will be even lower than during our
private lending activities.
Let us not forget that consumer lending in general is a mass market that is dominated by standardized
processes. SMB lending, on the other hand, allows for an individual approach which takes into
consideration the multitude of layers of a credit request. Thus, prior to being forwarded to our centralized
Credit Committee in Moscow, every corporate credit submission is carefully prepared in one of Bank s
regional branches. For example, our regional credit specialists conduct site visits during which they value
the respective companys market standing, monitor contractual partners, and go through a potential
clients consolidated financial statements. Such an in-depth approach enables us to select the top tier out
of 10 applications.
- Your bank has been in existence on the Russian market since 1993. This is an important period
in the relatively young Russian banking sector. Bank has lived through more than one crisis.
Based on your experience, which should be the strategy of todays commercial banks in Russia?
- Dmitry Leus: The survival strategy for niche commercial banks in contemporary Russia with its
economic uncertainties consists in sound risk management.
From a business perspective, the secret of success for weathering any crisis consists in the strong will of
the banks owners and stakeholders to preserve and develop their business. The first thing which is being
taught in business administration courses is the theory of economic choice that is, the choice one must
make when faced with two or more alternative uses of a resource. Crisis economics simply dramatizes
this basic economic choice.

The banking industry today presents higher risks than other economic sectors. To take these risks is the
choice of every shareholder and manager. I arrive at work before 8 am and leave the bank after 8 pm.
This is the only way to work in order to achieve good results. The banking industry consists of a multitude
of little things hardly recognizable to outsiders. However, taken together they critically impact the banks
financial results. Every aspect of the business must receive its due attention, starting with administrative
tasks and ending with the closure of big transactions. There are a million of details which may escape the
attention of the banks managing director. A permanently heightened state of alert should therefore
become the responsible bankers second nature. In my opinion, a bank controlled and managed by its
owners is the best guarantee of success.
In addition, the right risk management does not consist in doing the maths and then ticking the box.
Rather, it consists in picking up the faint signal of today that will become tomorrows big challenge a
practice the Austrian economist and management consultant Peter Drucker has called the anticipation of
a future that has already happened. Risks are present in every form of business. However, some risks are
balanced by reasonable rewards, others are not. The essence of entrepreneurship consists in getting this
balance right.