GENEVA (Reuters) - Worries about political stability and dirty money are making major private banks hesitate to set up shop in Russia.
Private banks have only small teams on the ground in Russia, out of proportion to the private wealth there, executives told the Reuters Global Private Banking summit.
"It is still an environment where we think the political environment needs to stabilize before it becomes an important market," Leigh Robertson, chief financial officer at HSBC HSBA.L Private Bank, said at the summit at Reuters offices.
HSBC’s presence in Russia is “very small,” and the bank is moving ahead “cautiously, as you would expect an international bank to do,” he said.
Samir Raslan, a regional manager for Citibank C.N in Switzerland, said Russians were holding their assets with Citibank outside Russia rather than in local accounts -- another factor limiting domestic growth in private banking.
But Citibank had doubled its Russian assets from 2009, “starting from a very low base,” he said.
The number of rich Russians, or high net worth individuals, was up 21.3 percent last year to about 118,000, though still short of the level in 2007, according to a June report by Capgemini and Merrill Lynch.
Private bankers, while not willing to go public with such concerns, also fear the negative publicity and legal dangers should tainted money enter their books.
Russia was ranked 146th out of 180 nations for perceived public corruption in a table compiled by Transparency International, an anti-corruption organization. Russia shared the spot with Sierra Leone and Zimbabwe.
But the country has great potential.
"I think Russia is a young market. We do our business there out of Geneva or London, but we might look to have a presence there," said Pablo Garnica, head of private banking for Europe, Middle East and Africa at JPMorgan Chase & Co JPM.N.
James Fleming, head of international private banking at Coutts & Co, a Royal Bank of Scotland RBS.L unit, said Coutts could give details about expansion in Russia in coming months.
“I think there is continuous wealth creation, not just in Russia, but in Kazakhstan and Ukraine and other countries there,” he said.
Josef Stadler, global head for ultra-high net worth individuals at UBS UBSN.VX, said growth in Russian assets could be more than twice the annual European market rate of 3.5 percent.
Reporting by Ian Simpson; Editing by Andrew Callus and Will Waterman
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