LOW LIQUIDITY IS A RISK FACTOR FOR RUSSIA'S BANKING SECTOR-STANDARD & POOR'S RATING AGENCY

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MOSCOW, June 8 (RIA Novosti) - The revocation of Sodbiznesbank's license and the uncertainty of Kredittrast's future have had an indirect, rather than direct, effect on the Russian inter-bank market, the international rating agency Standard & Poor's says in a press release.

As of January 1, 2004, the assets of Sodbiznesbank and Kredittrast totaled some 17 billion rubles ($600 million), by Russian accounting standards.

This accounts for a mere 0.3 percent of the Russian banking sector's assets, which means that the instability of the inter-bank market must be an indirect, rather than direct, consequence of the effect that the banks' closure has had on the country's manufacturing industries, John Gibling, a credit analyst with Standard and Poor's, is quoted as saying.

The events come at a time that the Central Bank of Russia is trying to tighten control over banking activities in the country and raise its efficiency, Standard & Poor's continues. This is extremely important for raising the crediting capacity of Russian banks, still rather low by international standards, it says.

The Russian banking sector lacks accurate and reliable information on beneficial (real) bank owners; the practice of granting loans to affiliated parties is quite common here, and the resource base and credit risks have a high concentration, which undermines the efficiency of control and creates hazardous situations for the entire banking sector. Russia's inter-bank market is fragmented and has low liquidity, which has long been viewed by Standard & Poor's as a risk factor for the sector, the agency says in its press release.

"We will be closely watching the conditions of funding Russian banks whose ratings we support," Gibling said. The agency is also going to provide a more detailed analysis of the wide spectrum of risks and difficulties facing operational Russian banks in a survey devoted to Russia's banking system, he added. That survey is to be released at the end of June, said the Standard & Poor's analyst.

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