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Russia: A Powerful Bank Deals With Problems Of Capital And Politics

  • John Helmer

Moscow, 5 February 1997 (RFE/RL) - When one of Russia's most powerful bankers decided to wipe out one of the bank's key investment subsidiaries, precipitating the loss of 60 of his top managers and staff, the thunderbolt should have been heard all over Russia's financial community.

But Vladimir Vinogradov, head of Inkombank, forced the departure of his Inkom-Capital investment group employees last month without explaining why and without attracting attention -- until the group found new investors and set up in competition.

According to the bankers who were axed, Vinogradov acted pre-emptively because he was afraid Sergei Kalugin, who headed the Inkom-Capital investment group, was getting ready to take his staff and their clients to another bank or to operate independently. But sources tell RFE/RL Kalugin was restive because bank chief Vinogradov had not delivered the capital that had been promised for the subsidiary's investment operations. Vinogradov could not deliver, say the sources, because Inkombank is short of cash.

This account is disputed by Vinogradov's spokesman, Alexander Subbotin. Subbotin says the bank has done nothing more than reorganize and centralize its investment-banking operations.

Sources say that when Vinogradov refused to supply $5 million to Kalugin's investment group, a falling-out was inevitable. Describing the infighting in the bank's executive suite, one official said "the pressure is so machiavellian there, your nose starts to bleed when you enter the office."

A shortage of capital inside the bank that ranks fourth largest in Russia in terms of assets, capital, and loan portfolio and third largest in deposits and pre-tax profit is much bigger news than a management shakeup. This is especially so in Inkombank's case, because the bank's credibility and Vinogradov's power were targeted by a rumor campaign in July of last year. That triggered a short-lived run on deposits and bitter recriminations in the press.

At the time, Inkombank's spokesman Subbotin attacked the state-controlled ORT television channel for "aiding a dirty campaign against Inkombank."

A top Inkombank executive said he believed the campaign was part of the political contest then escalating between government officials and Alexander Lebed, President Boris Yeltsin's Security Council Secretary, before he was forced from office in October.

Inkombank was believed to have helped finance Lebed's presidential election campaign. When Lebed then named Vladimir Groshev, a board member of Inkombank, to become his deputy on the Security Council, the political knives were out for the bank. Inside Inkombank, officials believe this triggered the anger of the office of Prime Minister Viktor Chernomyrdin, and in the circle around the President's Chief-of-Staff, Anatoly Chubais, who wield considerable power to favor other top-ranked banks.

What happened to lead Vinogradov into amputating staff who had been with Inkombank since its founding in 1991 was a result of this political feuding, bank officials say.

"This has nothing to do with the way the bank is run," said an Inkombank source, who requested anonymity."It's all politics. Eighty percent of the outcomes in the banking business are driven by politics."

He further explained that political connections with the Kremlin and with Prime Minister Chernomyrdin's cabinet are essential if banks are to receive the flow of state funds, which sustain liquidity and profitability at almost all the leading Russian banks.

"You can only grow so fast, unless you have a major capital infusion," the banker said.

Moscow brokers have explained recent failures in Inkombank's bidding for investment stakes in the oil and telecommunications sectors on bank chief Vinogradov's lack of political clout. The refusal of the government to accept the bank's tender bid to take over a large state-run agricultural credit bank last year has also been blamed on Inkombank's so-called "Lebed factor."

But, while difficult circumstances may have prodded Inkombank into reorganizing and reducing staff, its inclusion in a recently published list of 13 Russian "super-banks" authorized to conduct the government's banking business, signals bank chief Vinogradov still keeps powerful political friends.