CYPRUS MAIL Q&A. Dr. Kirill Zimarin, RCB Bank CEO

Transcription

1 CYPRUS MAIL Q&A Dr. Kirill Zimarin, RCB Bank CEO 1. How is business going? Business is doing well. Financially, we are strong and profitable. We are operating through our branches across the island. We are focusing on local business. I can give you an example. When we arrived here, the first thing I noticed was the green steel fence around this office. What did we do first then? We demolished it. Why? Because at that time we wanted to be, and now we are a Cypriot bank that operates here. We are creating our own processing centre. We are issuing our own cards. We are making all these services for cards and our card service is constantly expanding. Our online banking is developing. But again, we focus on the local market. 2. Why is it important? In my opinion, now we see two different trends. On the one side, we live in a global economy and in a multicultural society. But on the other hand, we see a very strong trend towards regional economies. We are lucky that the region, in the perception of a Cypriot bank is not Cyprus only, but it is also the EU itself. It s a big value to understand that your region is much bigger. Today, in the situation of rising tariff and protectionism, all cross-border operations are becoming more and more difficult to serve. 3. Is stricter AML affecting business? First of all I would like to say that AML requirements are not new. We are living under the Fourth Directive. And the Fifth is coming. But why AML legislation and regulation is so important nowadays? Because in my opinion, AML is an explicit demand of the society for more transparent world. 4. What do you mean by transparency? 1

2 Transparency means equal burden and equal tax burden on all parts of the society. It means that the rich and the wealthy, and those who are in need, should not only have the same rights, but they should also have the same responsibilities. Transparency, which is the key message of the society to the financial sector, is realised through the anti-money laundering procedures. What is AML today? It is the necessity to know not only your customer but to understand what this customer is doing, how he is conducting his business, who are his counterparties, what is the economic substance and where is this customer based? In general, I want to emphasise that AML today is a separate business line and understanding the essence of AML brings us to the next question, how the banking model should be changed. Because the bank is not a world of emotions. A bank is about figures and acknowledging. Figures mean your financial sustainability. That brings us to the idea of what kind of a business model it should be? AML today is of public interest. The reaction to this public interest should be through updating and upgrading the model of the bank, and that to my opinion is the key area where the banking sector especially in our country should concentrate on. 5. Why is your NPL ratio so low? We came to the market as the last in the row. That is why our history is much shorter than the history of our competitors in the country. We started operating in the local market in Experience is not a number of years but a number of situations. That is why we know that a loan should have only one characteristic: repayability. You lend money which comes from the bank s depositors and you must receive it back. There is no other way. You cannot make expansion in lending without thinking about the financial capacity of the borrower to repay it or the market. I think this is the main lesson that we and the whole banking sector has learned from the 2013 crisis onwards. 2

3 6. Don t you agree that RCB s entry ticket is quite high? We are working in a country with a high concentration of banking services. That is why we must be competitive, while thinking regionally, thinking European. Moreover, we are developing our online and digital services. We will, also, decrease the minimum entry ticket. But again, the decision to have a high-entry ticket was due to the high competition in this part of the market. The more digital you are, the lower the ticket. That s the rule. 7. What are the effects of geopolitical tensions? International tensions, regional conflicts, protectionism and sanctions do not help doing business. But they don t stop business. For example, we see a growing number of non-russian customers. Russian customers represent 12 per cent of our clientele (e.g. in terms of number and volume). This number of course is decreasing due geopolitical tension. Cyprus has always been an intermediary, a classic intermediary between different countries, especially between Russia and the West as well as Middle East. 8. What about the Russian clientele? Russian business in Cyprus can be divided in two parts: those who are dealing and living in Cyprus, who have been present and doing business through companies registered here, provide services, which is something you can see in Limassol on a daily basis. This part (which has physical presence, economic substance) is growing. I am not saying it is skyrocketing. They are using the bank which is convenient to them. We don t differentiate people by their passport. 9. Do you treat East European customers as high risk in terms of AML? You should differentiate between corporate and individual level. Individuals have permanent address, utility bills, residence permit, passport, whatever, are living here, organising a business, hiring personnel, having a payroll, paying taxes and having a tax identification number. Then I don t see a 3

4 problem. When we talk about the corporate level we then talk about crossborder transactions. We want to understand what is the reason why a company, which is operating outside Cyprus wants to open an account in Cyprus bank. Does this company either have an office here, or hired people with ongoing payroll, any physical presence? Do we see the economic substance in this business. By economic substance we mean that we move from KYC (know your customer) to KYCC (know your customer s customer). That is more important now. It s not only about accepting a customer anymore; you have to accept a business model of such customer. My strong understanding, when referring to the role of Cyprus as an intermediary in cross-border operations, is that the whole sector will be affected by thorough changes. Therefore, I said that we are moving to split corporate level from individual level. For sure, these services are on the table: private banking, wealth management, consumer financing etc. If we speak about corporate level, of course, the situation is much more complicated. The procedure of KYCC at a corporate level became more sophisticated and that brings the question of the cost. Every bank has to make its own assessments, whether it wants to continue this way or another way or whether it financially strong enough to combine this. 10. Has RCB resorted to closing accounts as part of AML efforts? We closed around 50 per cent of accounts belonging to PEPs (Politically Exposed Persons). We approve only 10 per cent of applications of new accounts by international clients. These rules are not new. We are working with these rules all the time. This problem appeared now at the public level. If you were dealing with a bank for the last five years that I remember, this situation was in place. 11. The Panama Papers and reports about Mr. Roldugin suggest otherwise Let s speak about Panama Papers. All the allegations which were formulated in articles regarding RCB were proven to be baseless and unfounded. Mr. 4

5 Roldugin never had any relations with our bank. He was not our customer. Therefore, I can say that it was just wrong allegations which were not founded. 12. What about the fine imposed by the Central Bank of Cyprus? When you receive a penalty, it is quite unpleasant. However, it is a routine integral part of business, the regulator finds omissions occurred during work and penalises for them. In general the examination was related to the quality stand of clientele files. We did not receive any material remarks, however different minor mistakes were found, which occurred during composition of clientele files, and they were related to availability of required documentation. You can always find those imperfections unfortunately. We have carried out sufficient work and substantially enhanced the quality of clientele files composition after this examination, taking into account the remarks which were provided to us. 13. You recently increased your stake in the Bank. How did you finance this purchase? The transaction (of Crendaro acquiring Otkritie s stake in RCB) was due to the fact that our partner and shareholder at that time, the financial company Otkritie decided to stop international operations and sell its stake in the bank. I was the shareholder of this bank for the last ten years. Crendaro, as any other shareholder of the bank, was receiving dividends. Because of the sound and strong financial model of the bank, the shareholders can borrow money. All the transactions were disclosed to the supervisor. It was approved by all supervisors and regulators. 14. Could you please explain why RCB resorted into appointing former public officials to its board? 5

6 We are very proud of the composition of the Board of Directors because it reflects the activity of the bank. We have strong international presence, we need to have experts who understand this. As a result of the international presence, the high complexity of the legal documents, you need an expert in legal matters. Then, we are operating in a local market, we need those who understand local market, not only on the level of the staff. I think we are very lucky that we have a very experienced staff operating on the local market. 15. Do you see any possible conflict of interest in appointing former public officials? They (the PEPs in the board) are not in public positions now. So there is no conflict of interest, and we must say another thing- being a bank under the ECB s (European Central Bank) supervision and CBC (Central Bank of Cyprus), any appointment of the Board of Directors, is passing through a very thorough assessment of these two institutions conducting the independent valuation that there is no any conflict of interest. For the bank it is a big value to have such prominent persons of the Cypriot community on the Board. It improves the quality of corporate governance. We value expertise and we value diverse experience. For example, Andreas Tryfonides is the head of the nomination committee so, his expertise, his knowledge, helps us to filter the personnel because it is the personnel that creates the revenue. The Board of Directors is actively involved through the risk committee, the audit committee, in the day-to-day business of the bank. We never experienced any criticism with respect to that. At the moment, of course, there is strong demand for banking experience in the board. It comes from ECB and we are responding to that. We are hiring new directors who have direct banking experience and the approval process of some cases are pending with the Central Bank of Cyprus and the European Central Bank. But again, I am in banking for a quarter of a century and I can tell you that wisdom in banking comes from experience. 6

7 16. Has RCB played any role in helping Cyprus to get a 2.5 billion loan from Russia in 2011? Categorically I say that RCB has not played any role for the loan to the Cypriot government. RCB has never been involved in any inter-governmental relations between Russia and Cyprus. There is a wrong perception of what happened. We are responsible for what RCB is doing. As far as I know, VTB has not granted a loan to Cyprus and RCB was never part of this transaction, both directly and indirectly. 17. What was the lesson for RCB following the publicity of the lawsuit of Miltiades Neophytou against former President Demetris Christofias? The message is clear. If you borrow money, you must repay. That is the strong message to all borrowers. If you sign a document headlined loan agreement, please repay. We will take all necessary action to protect the interest of the bank and our depositors. Our recovery policy is strong. We settled that case, I think to the satisfaction of both sides. That is the main lesson. The main lesson for everybody: If you are borrowing from RCB, this money belongs to our depositors. And we will do our best to secure their interest. 18. Is RCB reconsidering its options in Cyprus as a result of the recent geopolitical tensions, the increased AML requirements and the sanctions? Would it ever consider leaving the Cypriot market? No. We are continuing to develop business in Cyprus; we are indulging ourselves in doing so. We do carry out our business properly bank continues to be profitable during all last ten years, during which I was managing it, irrespective of all, crisis and sanctions. 7

8 Do the sanctions and stricter AML requirements create complications? Of course they do. Yet, it is neither the first challenge that we are dealing with nor the last one. We will continue to change and evolve portion of international payments will be decreased, the bank s clientele base is changing and will further continue to change, some transactions will be completed and instead of them new loans will be issued, and new services and products will be introduced to Cyprus market. 19. How optimistic are you about Cyprus economic prospects? You cannot manage and lead people if you are not optimistic. I am also optimistic that our country starts asking questions such as what is the strategy of the country? There are good opportunities. Whether we realise them or not, it depends mainly on us. Opportunities can create very favourable conditions for people who are coming to Cyprus and by this, substantially increase the quality of life of Cypriot people. 20. Which are the main challenges? To change the banking model, to increase the number of accommodation facilities for tourism, to improve quality, to focus on who is the customer of Cyprus, how he should look like, what kind of services does he need. I am living in Limassol for the past 14 years and Limassol today and Limassol 14 years ago are two different cities but with the same people. We, as Cypriot people, can change the life for the better and that inspires me with optimism. 8