Author: Leonid Sirota, Global Head of Trade and Export Finance
For some time there has been widespread discussion around Russia’s growing interest in the Asian markets. The region has attractive opportunities with strong capital and currency controls in place. In recent years there has been a significant bid by Russian banks to strengthen their foothold in Asia as they seek to expand their business outside the traditional markets.
While in 2015 a number of major global banks started to reduce their presence in Asia, VTB is leading the way for Russian banks in the region, being the only Russian financial institution with a full banking license in mainland China. To succeed in Asia, a bank needs to have long-standing relationships with local financial regulators and financial institutions, market expertise and a strong local base.
Despite the trade finance market being affected by the decrease in global foreign trade during recent years, the slump in oil prices and Russian currency depreciation, trade and export finance remains to be an important instrument for Russian clients wishing to do international trade in particular in the Asia Pacific region. Moreover Asian banks, particularly those in China, put strong and longstanding business relationships at high value for potential trade cooperation.
Developing partnerships with China’s largest state and local banks enables VTB to meet the needs of its clients that have business with Chinese partners.
Despite a decrease in Russia’s total trade turnover, the bank has been successfully growing its TEF portfolio.
In 2015- 2016, we signed several partnership agreements with leading financial institutions in China for the amount exceeding RMB 28 billion to support on-going Sino-Russian co-operation as well as provide more efficient mechanisms to finance bilateral trade. It should help to promote trade flows between the two countries, finance their import and export flows, letters of credit being one of the instruments. VTB also offers its clients an opportunity to receive ruble financing under letters of credit nominated in renminbi and other currencies if required, which helps to avoid currency risks.
To take its Asian business forward, VTB plans to expand its local customer base and develop a wide range of trade finance solutions through VTB Shanghai. This will include client export support by discounting letters of credit issued in their favor, using the opportunities on the Chinese interbank local market.
Other important business direction is enhancing cooperation with Sinosure based on cooperation agreement for $2 bln signed with VTB in 2015. Moreover, VTB Shanghai, which is treated as a local entity, is the only branch of Russian banks which may act as an Insurant, structuring buyers’ credits to importers the same way as global and Chinese banks do.
More importantly, building trade finance business in Asia and following their clients’ growing interest in the region is our long term strategy. China’s One Road, One Belt initiative, which was launched by the Chinese in 2013, reflects the region’s long-term trading flows directions. VTB sees this as a great long term opportunity and is ready to provide its clients with a wide range of products through a branch network in countries on this “route”.
Trade finance is a crucial element of global banking and will be instrumental in encouraging trade relationships and transactions. Having established relations with more than 1300 financial institutions worldwide and effective cooperation in trade finance with banks from more than 50 countries VTB is able to support nearly every foreign trade deal for its clients worldwide.
The global presence of VTB Group as well as its strong expertise in developing tailor-made trade finance solutions make the bank’ experience unique in Russia and CIS. VTB plans to continue applying its best practice in development of Asian trade and export finance direction.
Leonid Sirota, VTB