Transparency and Disclosure practices at Russian banks lag international peers, says report

/Standard & Poor's, Moscow, October 26, 05/ - The results of the 2005 Transparency and Disclosure Survey of the 30 largest banks in Russia, published today by Standard & Poor's Governance Services, bring to light the low disclosure levels of Russian banks, especially in comparison with international peers. Furthermore, transparency levels at Russian banks are lower than those of the largest Russian nonfinancial companies. The survey, entitled "Transparency And Disclosure By Russian Banks: Disclosure Practices Of Russian Banks Currently Dismal," reveals that the banks' average score is 36%. In contrast, the average score for the 10 largest international banks included in the peer group is 45 percentage points higher at 81%. Moreover, the 54 largest Russian companies surveyed by Standard & Poor's earlier this year within the framework of the Russian Transparency and Disclosure Survey scored 50% on average--14 percentage points higher than the largest Russian banks (see "Russian Transparency And Disclosure Survey 2005: Continuing Progress In Transparency, But Mainly Among Weaker Disclosers," published on RatingsDirect, Standard & Poor's Web-based credit analysis system, on Sept. 21, 2005). "These results suggest that regulators, in tandem with participants in the capital markets, should continue to apply pressure to banks in order to raise the transparency of the banking sector, which needs to open up to investors, depositors, and the general public," said Julia Kochetygova, Director of Governance Services at Standard & Poor's. "The current dismal disclosure practices of the top 30 Russian banks are detrimental to fostering good relations with the investment community and the general public: trust and confidence remain low, as shown by the bank run in Summer 2004 when banks lost about 2% of retail deposits during several days in July." "The requirements of regulation, the Basel Committee, and the Organization for Economic Cooperation and Development call for better transparency," added Ms. Kochetygova. "Transparency is also one of the prerequisites for civilized counterparty relations, good corporate citizenship, a solid business profile, and successful competition for capital." The survey is a research project by Standard & Poor's supported by the Russia Banking Corporate Governance Project of the International Finance Corporation, the British Embassy in Russia, and the U.S. Agency for International Development, which provided funding for the project. The survey is focused on disclosure and based on public information alone. It primarily analyzes disclosure from an international investor's perspective, benchmarking individual bank practices against the maximum level of disclosure optimal for such an investor. It looks at 102 items relating to: - Ownership structure and shareholder rights; - Financial and operational information; and - Board and management structure and processes. "The biggest gaps in Russian banks' disclosure include the identity of beneficial owners (only 16% of total private-stake ownership is disclosed) and information about related-party transactions, corporate governance structure, and procedures such as risk management policies," said Ms. Kochetygova. "Standard & Poor's also found that too few banks have board- level audit committees and that timely publication of international annual financial statements is lacking, with only 10 of the banks publishing 2004 IFRS and/or U.S. GAAP financials before July 2005." The report is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit research and analysis system, at www.ratingsdirect.com. It is also available on Standard & Poor's Web site at www.governance.standardandpoors.com and on the Russian-language web site www.standardandpoors.ru. For detailed information apply: Julia Kochetygova, Moscow (7) 095-783-4040; julia_kochetygova@standardandpoors.com Nick Popivshchy, Moscow (7) 095-783-4044; nick_popivshchy@standardandpoors.com Oleg Chvyrkov, Moscow (7) 095-783-4045 oleg_chvyrkov@standardandpoors.com Governance@standardandpoors.com [2005-10-26]