May 2010 saw the Board meeting of the International Banking Federation (IBFed) in Washington, where the Association of Russian Banks was invited as an authorized representative of the Russian banking community. The IBFed has 10 members, but objectively, it's the most representational and global banking institution that unites approximately 20 thousand banks worldwide. At least 700 of which are in the top thousand leading banking institutions of the world. All together they manage the assets of more that $30 trillion. The Federation is represented in every international financial center and every time zone.

STEPS OF THE WAY

The fist mutual visits and cooperation agreements between the Association of Russian Banks (ARB) and its counterparts from abroad took place soon after the association's foundation. In 1993, the agreement of cooperation with Bulgaria's Association of Commercial Banks was signed in Varna. This was followed by the agreements with national banking associations of France, Austria, Hungary, Lithuania, Poland, Portugal, Greece - from more than 20 different countries altogether.

With some of partnership organizations, the relations didn't go far beyond an occasional exchange of delegations, seasonal greetings and episodic speeches at international banking conferences in the respective countries. In contrast with others there is an intensive exchange of ideas on the most topical banking issues, on the ways and means to boost the competitiveness of national financial and banking systems, and to support the sustainable growth of the real economy. A common platform is also being formed for joint international actions on the issues of mutual concern.

This is the way that our relations are developing with the P.R.C., based on cooperation agreement signed between the ARB and the China Society for Finance & Banking. Both sides “check the watches” at the regular Sino-Russian Forums on Banking and Finance. The fourth such forum took place in October 2009 in Beijing. Their scale and significance can be compared to those of the national banking festivals that have been organized in Montenegro for the fourth consecutive year in close contact with the Association of Montenegrin Banks.

The international banking alliances linked to the ARB by arrangements on practical experience exchange and joint actions play a special role in foreign activities of the Association. Such alliances operate in post-Soviet and post-Socialist area, as well as in Europe and worldwide.

Since 1997 the ARB has been developing cooperation with the European Banking Federation (EBF). The EBF's headquarters in Brussels bring together the national banking alliances of all Western European economies and several neighboring states with close economic ties with the EU. The latter are mostly the associate members of the EBF.

In 2005 the Russia Federation and the EU signed the Common Economic Space (CES) agreement as a part of a single package of Road Maps for the creation of the four common spaces. Among other things, this agreement provides for consolidated development in such crucial areas of our financial cooperation as banking, insurance, investments, stock market activities, accounting, auditing, statistics and financial reporting. According to the Road Maps, dozens of new dialogues were launched between Russia and the EU, including the official dialogue on economy and finance in which the Russian Ministry of Finance and the Ministry of Economic Development are partners of the European Commission. The EU-Russia Industrialists Round Table (IRT) is the main platform for business dialogue and its purpose is to provide a framework for paving the way across one of the most complicated Road Maps.

The Financial Industry Task Force (FITF) which was organized by the ARB and the EBF under the aegis of the IRT is working on the financial contents of the CES road map. The FITF includes heads of leading banking institution in Russia and the EU, and insurers and stock market players, as well as representatives of legislative and executive authorities, financial supervision and regulation bodies, and large auditing and consulting companies. The coordinating Board of the Council of Organizations of Professional Financial Market Participants (SOPROFIN) formed in 2004 by the Association of Russian Banks, the All-Russia Insurers Union (VSS) and the National Association of Securities Market Participants (NAUFOR), is the core of the Russian segment of the Group.

At the ARB's initiative, supported by the EBF, the FITF addressed the European Commission with a proposal to deliver a joint comprehensive program for the common Russia-EU space for financial services to be presented in the form of so-called Green and White papers. The EU issues such papers when developing important documents that affect interests of various sides and require public discussion. A Green paper is a document with alternative proposals and prescriptions intended to stimulate debate and launch active dialogue between business and authorities, on most acute issues of developing the financial services in this particular case. A White book sums up discussions and with a set of practical conclusions and suggestions for forming the common financial and economic space it is intended to provide a clear action plan for further joint actions. The Terms of Reference were developed with the assistance of the European Bank for Reconstruction and Development and then adjusted by the FITF according to recommendations coming from the Delegation of the European Commission to Russia.

The document provided for the comprehensive initial comparative analysis of the financial and banking legislation, supervision and regulation practice, as well as of the financial infrastructure in Russia and the EU, in order to determine their key differences, objective development peculiarities and subjective obstacles to creation of the common financial and economic space. It suggested that such core ingredients of the financial services market as banking and insurance systems, stock market and investment institutions, pension funds and other non-bank financial structures, systems of financial legislation, supervision and regulation, infrastructure and financial and banking practice should be considered in a coordinated fashion at the macro-and micro levels, paying key attention to the role of financial institutions in developing real economy and providing for citizens' need of financial services. Consequently, it was supposed to result in specific legislation initiatives on aligning and synchronizing the development of the financial services market in Russian and the EU, and on forming a financial supervision, regulation and infrastructure system adequate to today's requirements.

One would think that finding a more   important   cooperation   sphere would be a hard task in modern environment, when in Russia, EU or even globally significant reforms started in banking and finance in order to overcome the ongoing crisis and to prevent catastrophic financial and economic turmoil in the future. Nonetheless, after many months of discussions in Moscow and Brussels, this project being supported by the Russian Ministry of Finance, the Ministry of Economic Development and the profile committee at the Council of Federation of the Federal Assembly of the Russian Federation, was rejected by the officials in Brussels. This was a major setback to the prospects of joining the efforts of the official dialogue participants, and of that between business representatives of both Russia and the EU on synchronized and stable financial development that would facilitate the mutually beneficial cooperation.

A DIALOGUE OF EQUALS

In May 2010 the Association of Russian Banks was invited to represent the Russian banking community at the Board meeting of the International Banking Federation (IBFed), that took place in Washington. The IBFed is the representative body for national and international banking federations from leading financial nations around the world. Its membership includes the American Bankers Association, the Australian Bankers' Association, the Canadian Bankers Association, the China Banking Association, the European Banking Federation, the Indian Banks' Association, the Japanese Bankers' Association, the Korean Federation of Banks and the Bankers' Association of South Africa. This worldwide reach enables the Federation to function as the key international forum for addressing legislative, regulatory and other issues of interest to the global banking industry.

The Washington session participants discussed the core issues that the international banking system is facing in the light of the global financial reforms, and exchanged their opinions on developing national financial and banking systems. Among other decisions, a coordinated action plan based on the schedule of preparatory works for the most important international meetings related to the banking regulation and to the global financial problems, is worth noting. This includes the next G20 summit scheduled for 11-12 November 2010 in South Korea, as well as the preceding meetings of G20 finance ministers and central bank governors, the sessions of the Financial Stability Board, the Basel Committee and others. The IBFed executives and the following policy working groups run by the Federation are in active dialogue with the various international standard setters:
1.   Basel Group (capital and liquidity issues);
2.   International Accounting Standards Group;
3. Financial Crime Group;
4.  Value Transfer Networks Group (currently studying payments issues);
5. Corporate Governance Group;
6. Macroprudential Issues Group;
7. Financial Markets Group.

A separate Working Group for the Heads of Communications and Media from the Member Associations and the Associates is run by the IBFed Managing Director, who also doubles as Deputy Head of British Bankers' Association.

The ARB is going to join the activities of all the IBFed working bodies, thus directly contributing to the above global banking activities, strengthening our business cooperation with foreign counterparts and helping to accumulate their experience in order to boost the competitiveness of Russia's banking system.

In addition to workgroup leaders' reports, the Washington meeting also considered proposals regarding the Federation's response to already-known discussion papers on the finance and banking reforms, such as the IMF Interim Report for the G20 “A Fair and Substantial Contribution by the Financial Sector” to repay the burden associated with governmental interventions to repair the banking system during the crisis.

If one attempted to summarize the views of international banking community on the current situation in global banking and prospects of its further development, the essence they may look as follows:
The gross effect of the reforms currently adopted or considered is great, but there is also a risk to damage the real economy;
• To support the efficiency of the international banking system, the measures taken should be well synchronized, truly international and fundamental;
• International standard setters should stick to fair regulation principles, while leaving to national supervisory and regulatory authorities some room for manoeuvre when applying them in different jurisdictions, at the same time also consulting with the banking industry professionals;
The reforms should be aimed at a substantial, sustainable, and balanced growth;
• The banking industry supports the reforms, taking on board the lessons
learned from the crisis and confirming its readiness to play its role in the economy; • Banks and their professional organizations:
-  take care to reform their activities and secure the proper risk management, also realizing that there is still a lot to do;
- support the development of international cooperation, insisting that coordination of reforms should always be in the focus of the G20's attention;
- suppose that the G20's goal should be to establish the principles, but not to issue some ultimate instructions (which will retain certain flexibility for national regulators), and the G20 should address a broader spectrum of issues than just financial regulation, although not at the expense of core problems;
-  think that the key items on the G20's agenda should include revision of the Basel Accord on capital and liquidity and a comprehensive evaluation of potential effects of all the initiatives proposed, with a complete understanding of their consequences for the economy in general, and for the banks, in particular;
- suggest considering, among others, the issues of strengthening supervision over cross-border institutions (including the use of international panels of supervisory authority officials); mutually recognize national financial regulatory systems and their activities, develop the cross-border crisis management infrastructure in order to limit systemic risks, strengthen the markets, simplify the accounting standards, and ensure an organized, coordinated lifting of governmental support from banking institutions.

Regarding the G20 discussion on the financial sector's contribution to budget costs of an actual or any future crisis, IBFed considers it at least untimely introducing any additional bank tax or levy for this purpose. Such initiatives seem rather unproductive both in the form of special financial reserve levy and even more so in the form of general tax on bank operations turnover. This position is based on the following arguments: firstly, the issue of budget compensation for the support extended to banks during the crisis should not be mixed up with the task of preventing potential budget losses in future financial perturbations; secondly, taxation issue is first and foremost a national one to be assessed in the context of a variety of national considerations; thirdly, it is not fair to punish banks by activity tax, especially when it is clear burden of this is likely to fall on the clients, including those from real economy which seeks to emerge from the recession and fourthly, it is illogical to weaken the banks which had just been supported by huge budgetary injections at the time when the banking sector only started to recover, whereas the future looks far from bright.

The International Monetary Fund estimates the total bank losses during the current crisis at USD 2.3 trillion at least, and some USD 5.0 trillion financing attracted by banks is due to be refinanced within the next 3 years. Doing this will be neither easy nor cheap because of the banking crisis growing into a crisis of sovereign indebtedness for a number of matured market economies.

IBFed members give their overwhelming priority to the completion of the important prudential supervision reforms and propose any initiatives for new for taxes or levies to be set aside in favor of improving the application of effective prudential standards and efficient multi-level supervision practices and creating an effective infrastructure for early warning of the systemic risks.

The topical questions for the Russian banking system - how many and what sorts of banks the country actually needs and what the minimal bank capital should be -were also addressed. Our colleagues from the IBFed, particularly from the American Bankers Association that represents the world's most powerful banking system, are convinced that the market must find answers to those questions on its own, without any pressure from the authorities. The economy and people need both large and small banks with various functions and different geography of activities. Among 9000 banks now working in the US there are the major transnational banks and quite tiny banking institutions, that enjoy different supervision and regulation but all have their own niches and make their own contributions into the development and strengthening of the US economy.

The IBFed membership and activities show vividly that countries with so-called emerging market economies (Russia among them) are becoming full-scale participants in the global dialogue on the core issues the world economy and international relations development.