Transparency and Disclosure practices at Russian banks slow to improve - S&P

/Standard & Poor's, Moscow, October 12, 06/ - The results of the 2006 Transparency and Disclosure Survey of the 30 largest banks in Russia, published today by Standard & Poor's Governance Services, signal modest progress over the year. At the same time, we note substantial improvements in transparency of ownership and better disclosure of risk management policies. The survey, titled "I Transparency And Disclosure By Russian Banks: Modest Improvement and Better Ownership Disclosure Create New Leaders," reveals that the 30 largest Russian banks on average disclose 48% of the information items required by international investors. Although our 2005 survey showed a lower average score of 36%, the difference is mainly a result of methodological changes, which reflect our greater focus on the information needs of creditors in the 2006 survey. Net of these changes, the average disclosure improved by a modest 3 percentage points. Furthermore, there is still considerable room for improvement, as shown by the 79% benchmark observed at the banks' international peer group. However, we note that a number of Russian banks have made substantial progress: The new transparency leaders include MDM Bank, BIN-Bank, Alfa- Bank, and Rosbank which all have scores of 64% and above. "We conclude that improvements in transparency are to a great extent driven by the need to raise capital on the international markets, and to a much lesser extent result from regulatory requirements," said Julia Kochetygova, director of Governance Services at Standard & Poor's. "All but a few mandatory reports submitted to the Central Bank of Russia are kept confidential by the regulator. This includes the IFRS-reconciled statements, which have become mandatory since 2004." At the same time, a separate analysis of shareholder-oriented disclosure shows an average score of 32% of required items of information are disclosed. This is not surprising in view of the ownership structure of studied banks, only two of which are public. The increasing interest of Russian banks in attracting strategic investors and performing IPOs on Russian and international exchanges raises the relevance of this disclosure, as it indicates the extent of informational "IPO readiness" by the studied banks. Similar results follow from our analysis of governance structures of Russian banks, which showed that, on average, about 29% of governance structures and procedures commonly found at the leading well-governed international banks and corporations have been implemented at the largest Russian banks. The survey is a research project by Standard & Poor's supported by the British Embassy in Russia, the European Bank for Reconstruction and Development, and the U.S. Agency for International Development, which provided funding for the project. The survey is based on public information alone. Its updated methodology accounts for 107 items of disclosure grouped in three blocks: - Ownership and corporate structure. - Financial and operational information,and - Board and management structure and processes. "Among the improvements, we note better disclosure of ownership structure and risk management policies. Disclosure on related-party transactions remains one of the weakest areas, however, despite its being highly relevant for investors," said Ms. Kochetygova. "Disclosure on board and executive compensation, board structure and process, and auditor's fees is also weak." For detailed information apply: Julia Kochetygova, Moscow (7) 495-783-4040; Julia_Kochetygova@standardandpoors.com; Rinat Kirdan, Moscow (7) 495-783-4044; Rinat_Kirdan@standardandpoors.com; Oleg Shvyrkov, Moscow (7) 495-783-4045; Oleg_Shvyrkov@standardandpoors.com [2006-10-12]