U.S. Considers Belarusian Banking System Underdeveloped, WikiLeaks

14.01.2011 16:59
Архив Редакция

Infamous site WikiLeaks has published another batch of secret material correspondence of the U.S. State Department, which covers the state of the Belarusian banking sector prior to 2005. "The banking system in Belarus is characterized by its underdevelopment, lack of foreign competition and constant government interference," the document says.

In particular, early reports indicated that the «cash outside the banking sector is the preferred method of payment because, what the GOB doesn’t see, it can’t confiscate or control.» GOB intervention in the operational activities of both private enterprises and government- controlled banks is the cause of most of the problems in the banking sector. However, despite these systemic problems, public trust in the banking sector is growing,» says the dispatch.

Next goes the information that there are 31 banks, registered in Bearus. With 80% of the Belarusian banking system is owned by the State or the National Bank. Four of the six largest banks are majority state owned, and the other two are minority state owned.

«Only one western bank operates in Belarus, Priorbank, majority owned by Austria’s Raiffeisen International Beteiligungs AG. Priorbank, Belarus’ third largest bank, has greatly outperformed the state banks, accounting for over half of all banking profit in 2004 and with a return on equity of 22.3%. The two largest state-owned banks had returns on equity of only 3.5%,» BelaPAN quotes the document.

Belarusian Banking System Lacks Skilled and Educated Labor, United States

The dispatch also says that the Belarusian banking system is characterized by poor infrastructure, low quality and reliability of accounting systems and lack of skilled and educated labor in the financial sector. «Generally Accepted Accounting Principles (GAAP) and other internationally accepted methods of accounting are not taught inside Belarus. They have developed their own standard, called the «Belarus Accounting Regulations,» the document says.

In addition, states that the President of Belarus Alexander Lukashenko has unlimited control over all aspects of the National Bank and any member of the Board of the NBB can be removed from office by the president with a simple notification to the National Assembly.

«The reasons for removal vary — according to a dispatch. — From expiration of one’s term in office to the well-known Soviet scheme of «inability to carry out functions for health reasons on the basis of findings of medical examination.» In other words, non-observance of decrees, edicts and directives of the President of the Republic of Belarus will be cause for removal. Officials like the Chairman of the NBB, a mining engineer by training, rely on the president’s goodwill to remain in their positions.»

Most Belarusian Workers Have No Bank Accounts

According to the document, in Belarus, cash is still the main form of settlement used by individuals. A large share of wages, retirement and welfare benefits are paid in cash, particularly by private employers. Most Belarusian workers do not maintain accounts with banks, according to a dispatch.
 
«Some large enterprises have started to pay wages by using a bank-sponsored corporate plastic card. However, cash is still the prevailing instrument used to pay wages. Plastic cards were first introduced in Belarus in 1993,» the published material.

Government of Belarus Chooses to Impose its Authority over Control of Cash, U.S.

«The current political situation in Belarus leaves banking institutions subject to various and frequent presidential decrees that have had significant impacts on the flow of, and access to, cash by its citizens. The GOB chooses to impose its preemptive authority over the control of cash with little or no regard for the rule of law,» the document says.

«Its (the government) consideration of the impact on society or the business climate in Belarus is secondary to its ultimate control of the cash economy for political ends, namely to ensure economic and social stability for the survival of the regime,» according to the material.

If «Evergreening» Worked Once, why Not Try it Again, United States

The document also states that the largest bank in the country must register banks to ensure that the level of non-performing loans (NPLs) fell below the specific threshold in 2003. «When the government in Belarus wants something to happen it does, at least on paper. The targets were met and NPLs reportedly fell from 14.4% of the loan portfolio at the end of 2001 to less than 4% at the end of 2003. [Comment: Amazing how far a little «cooking of the books» will get you.],» the report said.

«In May Lukashenko declared 2005 as the «Year of raising the efficiency of economic activities and saving resources» (Ref A). In his comments, the president stressed that his prior targets were not met and ordered the NBRB to investigate. He again ordered the NBRB to reduce bad debts. If evergreening worked once, why not try it again. He also «suggested» the GOB should continue its efforts to transfer accounts of industrial giants to state-controlled banks,» said in the document.

Despite Problems in Belarus, Banking Sector Credibility’s Growing, U.S.

However, the dispatch states that despite these systemic problems, public trust in the banking sector is growing. Ruble deposits grew 74 percent in 2004. However, this growth was still not enough to offset the sector’s liquidity crisis in late 2004.

In the dispatch also shows that in January 2005 the NBRB announced it was interested in selling its interest in three banks operating in Belarus.

Shares of Belvnesheconombank, Paritetbank and Bank Mezhdunarodnoy Torgovli i Investitsiy (Bank for International Trade and Investments) are up for the highest bidder. As of July these banks are still listed as available. This suggests limited interest by potential buyers when the GOB’s current stated policy is to transfer accounts away from private banks and into state controlled institutions,» the document says.

Authorities Continue to Impose its Agenda on All Spheres of Life in Belarus, U.S.

It is also noted here that the GOB continues to impose its agenda on and exercise significant control over all facets of life in Belarus. » Its ability to significantly control the financial sector in Belarus will continue to keep western influences in check for years to come. Its strong-arm tax strategies combined with intrusive presidential edicts will make it difficult for financial institutions to operate in Belarus, at least according to western standards,» the dispatch said.

» The state’s economic policy is directed at keeping the economy under strict government control. While this may work in the short term, ignoring fiscal realities over the long term can only lead to destabilization. Nevertheless, growing consumption, spurred by economic growth, is forcing more Belarusians to turn to the banking system for credit and deposits,» stated in the document.