Russia may wind up with the most broadly diversified banks in the world by complete accident. While banks in the US and Europe can look forward to seizing more conventional collateral assets such as houses when loan recipients run into trouble, Russian banks may truly wind up becoming banking supermarkets.
When Russian billionaire Alexander Lebedev'sOAO National Reserve Bank seized collateral offered against a loan from a cash-strapped borrower, a health quarantine was slapped on the security: 40,450 pigs.
"We had a court decision to take away the collateral, which is the pigs," Lebedev, 49, said in an interview in Moscow.
With some estimates placing the level of loans secured by "strange assets" at state banks at close to 20%, it's not just tens of thousands of pigs Russian banks need to make space for.
The list of unorthodox collateral filling up banks' balance sheets is long. Sberbank received a holding of 50 percent plus one share in Wild Orchid. Russia's biggest lingerie retailer pledged the stake as it seeks to restructure 1.6 billion rubles of debt owed to Sberbank, Anton Sergeyev, a spokesman at Wild Orchid, said by phone.
VTB has taken majority stakes in 11 alcohol producers as payment for debt and became a majority shareholder in two developers, including a project to overhaul the Dynamo soccer stadium in Moscow.
But this could be a major diversification opportunity for state-run banks. What could possibly go wrong when your institution is a major player in sex and alcohol?
"It's becoming necessary for banks to run businesses they wouldn't have dealt with a year or two ago," (deputy chief of Russia's Deposit Insurance Agency Andrei) Melnikov told reporters in Moscow today. The process may act as a "diversion" from the banks' main activity, he said.
Russian Banks Count Pigs, Lingerie as Collateral [Bloomberg]