TBY talks to two chairmen about the changing landscape of the banking sector and the implications of new regulations.
What are some defining elements of the bank’s strategy under your leadership?
GURAM ANDRONIKASHVILI Fortebank was established in 2007 with a focus on retail banking, with consumer retail lending as the main product of the bank. When we bought the bank in 2010, we repositioned it to work in the SME and corporate segment. At that time there were 16 branches throughout Kazakhstan, and so we were able to serve clients throughout the whole country. There was also the banking license and the people who worked here. We did not focus as much on the clients that the bank was serving because they were completely different from the clients we work with now. We now focus on medium to large SMEs and corporates. The bank has grown very quickly in the last two years. From 2010 to 2011, the bank’s assets increased from $12 million-$15 million to approximately $250 million. Our loans grew by 80% in 2011 alone. Furthermore, the number of our clients has grown over 100% in percentage terms.
MICHAEL LOMTADZE We have very simple vision, “to be the best retail bank in the country.” Therefore, our focus is primarily servicing mass-market retail customers. Our general idea is to provide the right customer with the right product through the right channel at the right time. We are developing 360° around the customer, which means we are building our business around customers and integrating customer acquisition, sales, and service channels to provide the best quality service. The speed of service and sales has been an important competitive advantage, which we have been constantly building. Over the past three years, we have developed innovative products. We have introduced the first mass-market credit card in 2008. To date, we have issued more than 1 million credit cards, which put us in the number one position in Kazakhstan, and sixth or seventh in the CIS region. We have also been introducing products such as cash loans, which is a simple product to satisfy the various needs of our customers.
What are your expectations from recent changes in the banking law and regulatory structure?
GA Previously, it was fashionable for the central bank and the regulator to be together, then the UK started the fashion of trying to split the Bank of England and the Financial Services Authority (FSA), and everywhere else in the world it became fashionable to split the regulator and the monetary policy determinant, and after the crisis it became again fashionable to consolidate them back. We are following the worldwide trend. It is difficult for me to say what it means, but of course it means that the National Bank will be much more closely involved in the oversight and regulation of the banking system, which probably is for the best to ensure that the banking system is stable and that it is more involved in decision making. At the moment, we have not felt the effect of many procedural changes, but, overall, the National Bank having more oversight is probably a better thing for the protection of the banking sector.
ML The new banking law combines many policies into a single legislative package. There are important lessons to be learned from the crisis, such as the fact that banks should not lend to the extent they did before and should not be investing outside of Kazakhstan to such a large degree. Moreover, our banks will not be permitted to carry many speculative financial instruments on their balance sheet, as they were doing before. Today, we enjoy a much more transparent system that functions as a manual for the banks as lenders. Banks should refrain from participating in activities such as hedge funds or real estate funds. This is simply too risky. These are the factors that led to the demise of many banks worldwide and in Kazakhstan. The legislation creates limitations on international expansion, and now banks cannot invest more than a certain percentage of their capital outside of the country, which may be temporary. I still believe that Kazakhstan needs to expand its business into bigger markets. This will be good both for business and the country. If we decide to work outside of Kazakhstan, we would like to invest more than the specified 10% of our capital. All drawbacks aside, the laws bring personal responsibility to both management and shareholders.
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