Last week, Kremlin spokesman Dmitry Peskov spoke of the special relationship between Russia and China. “Our partner,” is how he described it.
Nowhere is the close relationship between the two countries more visible than in banking.
For the last 18 months, Credit Bank of Moscow (CBM), the country’s eight largest bank in terms of assets, has been leading the way as it develops an ever-closer relationship with China.
It is starting to embed itself in the Asian financial landscape.
For example, in April last year, the bank raised a $500 million syndicated loan with ICBC and Harbin Bank as lead arrangers. At the end of December, it become the first privately owned Russian bank to raise a Rmb2 billion ($280 million) syndicated loan from regional banks in China; and in early June, it raised up to Rmb200 million from the China Development Bank.
But the bank wants to do more than a few deals.
Sign of CBM’s serious intentions came in early December last year when the bank was assigned an AA+ rating by Lianhe Ratings to add to the BB/BB-/Ba3 ratings it has from S&P/Moody’s/Fitch.
The bank’s direction is driven by Vladimir Chubar.
Not only is he the bank’s chief executive, he has also been deputy chairman of the Russian-Chinese Financial Council (RCFC), one of the largest cross-border associations encouraging the development of business contacts between Russian and Chinese financial institutions, since May last year.
Talking via Zoom, he explains the bank’s strategy, how he can help the Belt and Road strategy and why joining the Cross-border Interbank Payment System was an important step for the bank.
The following transcript of FinanceAsia’s interview with Vladimir Chubar has been edited for brevity and clarity.
Q Over the past few years, you have made a clear policy decision to target Asia. Why?
A The bank has had a strategic focus on operations in Asian for several years. China/Russian trade has grown well and the volume now stands at more than $100 billion. The syndicated loan [we closed in January] was an opportunity for us to set up relations with regional banks in China and to promote trade. The best way to begin relations is to open risk on each other. If you have risk, your risk people have to look at the bank, your managers, your board, and the people in your bank should look at your partner, this is important. Any relations with new banks open up the potential for growth.
Q Was joining the Cross-border Interbank Payment System, a game-changer for you?
A CIPS is a payment system which offers clearing and settlement services for its participants in cross border payments and trade. For RMB-trade related activities, it's a very important step. Credit Bank of Moscow has already joined CIPS as an indirect participant with a number of banks like Bank of China and ICBC. This helps us diversify the channels of our RMB operations.
Q The last few days have made clear that the Sino-US trade war isn’t going away. Do you expect to benefit as it drags on?
A My position and the bank's position is not to comment on anything political. You should earn money on positive things, not on negative things, and any war is negative. As a bank, we are only looking for commercial operations and we have seen an increase in trade between Russia and China trade for several years. Any positive changes in the relations between China and the US will be welcomed by the world, by Russia and by many other countries.
Q How can Credit Bank of Moscow strengthen business relationships and ties between financial institutions in Russia and China?
A Nothing can happen without personal engagement. Our bank supports mutual discussions and it's really important to take onboard new banks, even regional smaller regional banks. Any discussion is productive. We also consider the Belt & Road initiative as a good chance to deepen our relationships with Chinese financial institutions. As you know, we are trying to encourage our corporate customers to be more active in terms of raising money in yuan and we have recently completed or are about to complete around 10 deals. If you do your work every day, success will come to you. It is that simple.
Q What role do you think you can play and how are you helping the Belt and Road initiative?
A For us it is about finding the right operations we can finance, be it a Russian company or an international company. We can help companies build new relations when we know the client in Russia or the client in China. In this way everything is straightforward.
Q where do you expect to see the focus of trade between Russia and China over the next 12 months? What sectors are on the rise?
A We are open to everything. It is our credo to be the bank for any operations for our customers. We see good perspectives in the oil and gas sector, as well as commodities and the import of goods to Russia such as electronic devices, consumer products, equipment and so on. The agricultural and chemistry cooperation is rising, so we expect more export flow to China in these fields.
Q You have a BB/BB-/Ba3 rating, but how important was it for you to get an AA+ rating from Lianhe Ratings in December?
A My colleagues encouraged me to look at it even though I was initially sceptical. But after we did it, I told them that they were absolutely right. If it's a local rating, it's also a good quality stamp. In China, it was an important step for us to show local investors that we're going to be here for many years. A local rating also creates an understanding for partners in China how to compare us with other banks in the country. It was an important step and any other Russian bank which wants to be active in Asia or in China should go down this route.
