Since the Russian financial crisis of 1998, and the many reforms that followed, private banking has been on the rise and is now ready to compete with the West.
The private banking system had not begun development until the mid-1990s. This was not unnatural as many form of private enterprise were in their early stages. In fact, it was due to the lack of reliance on banking within Russia which helped a speedy recovery after the 1998 crisis. At the time, few banks entered the area. This is entirely different now.
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Almost all of the major retail banks, such as Sberbank and VTB, in Russia now offer private services, not to mention all of the international banks, such as Deutsche Bank and Citi, which have entered the industry.
The sector is incredibly tight-lipped as it continues its development. The assets under management (AuM) total at approximately $65 billion as of 2011, according to WealthInsight. This is only 7% of the total assets of Russian HNWIs, which shows the amount of untapped potential within the wealthy population of Russia. Other figures say that there are anywhere between 75,000 and 180,000 millionaires in Russia with combined assets that could reach $350 billion.
While the system is largely based on the Swiss model, there are some differences. One of the most noticeable is the VIP clientele. Many that use private banks are known as VIPs and can be celebrity or just owners of a long-running business. Expert claim that the number in this category could rise in the coming years. As many of the business owners launched their businesses in the 1990s, the question of handling inheritance is becoming an issue.
In addition, the global financial crisis may spur more HNWIs to invest in private banking. Since 2008, many have begun to change their focus from the unreliable stock market and more into diversification to lessen risk. This assists private bankers as help is needed to take these new plunges. A particular trend in Russia, and worldwide, is the rise of the small local bank. Reputations were ruined after the crisis and a more reliable, and hands-on, approach that smaller banks provide are becoming increasingly necessary.
