229 Russians Visiting U.S. for Banking 101

Two dozen young Russians, fledgling students of a new capitalist order, bend studiously over a sheaf of loan applications--and think.

This case is a hard one, their American instructor warns his students, junior banking executives from the former Communist superpower: A young man in his 20s has asked for a modest, unsecured loan. “He’s young, he needs a hand,” a member of the class, himself in his 20s, suggests sympathetically.

But how do you know he’ll repay?

“Look into his eyes,” a female banker suggests. “That will tell you if he’s honest.” The instructor, Rick Webb of BankAmerica, suggests gently that a look at the applicant’s employment history would be more sound. After a few minutes of discussion, Webb puts the question: Do we grant the loan?

“No!” the Russians chorus in a happy jumble of languages. “No! Nyet! “

The students in Webb’s class are not high government officials or senior Kremlin policy-makers. They are not even the bosses of the Russian institutions they come from. But what they are doing here will help determine whether Russia faces a future of prosperity or chaos.

Much the way early Peace Corps volunteers tried to help Third World villagers dig wells, establish schools and develop other vital components of progress, training programs like this one are attempting to teach cadres of young Russians the basic skills needed to create and maintain a modern economy. In this case, how to run a bank.

For most of the summer, a select cadre of 229 bankers from the former Soviet Union have been taking classes, touring American financial centers, learning how to turn down loan applications with Western gusto--and picking up such other skills as how to help state-owned firms turn private.

Not incidentally, they have also been learning about baseball and shopping malls, about Rotary Clubs and small-town jubilees and all the other things that make America different from their own tumultuous land.

Their eight-week training program in Western ways, funded jointly by the federal government’s Russian aid program and dozens of American banks, has an ambitious goal: helping Russia’s banking sector make up for 74 years of lost time under communism. Just what that means is hard for Americans to comprehend, as the basic elements of this country’s present-day financial system are mostly taken for granted.

“They don’t have a credit system. . . . They don’t even have a functioning payments system,” said E. Gerald Corrigan, just-retired president of the New York Federal Reserve Bank, who created the program. “If those things aren’t there, how can you expect that much else will be?”

After almost a century with no real banks--and an economic creed that hoped to abolish money altogether--Russia is trying to grow a banking system from scratch. And the students in Corrigan’s program are the people who will do the growing.

The main thing, Corrigan said, is intangible: “I want them to walk away with a sense of the culture of banking.”

So far, the program seems to be working.

“At first I thought our two systems were so different that there wouldn’t be much we could learn here,” said Galina Krolovets of the Omsk Savings Bank, one of the students in Webb’s class on consumer credit. “But all these ways of thinking about credit and risk are going to be very useful. We can do a lot with this information.”

The program has been rigorous. The bankers, most in their 20s and 30s, spent five weeks at Connecticut’s Fairfield University, a Jesuit college on New York City’s suburban edge, absorbing courses on accounting, banking law, regulatory structures, credit, consumer services, import-export financing and privatization.

Then they fanned out across the country for three-week internships at institutions ranging from giant BankAmerica to the tiny Apple Creek Bank of Apple Creek, Ohio, to see how banking works.

In most cases, the Russian bankers lived as house guests of local bank officers--as in Apple Creek, where Galina Krolovets and her husband, Yuri, stayed with the family of Alfred Leist, president of Apple Creek Bank.

“They are one of the nicest couples we’ve ever had the pleasure to meet, and we’ve been taking them everywhere,” Leist beamed. “On Sunday, they came to worship with us at the Lutheran Church. They said it was a little bit like the Russian Orthodox, but not much. And we just had the annual village festival--which we call Johnny Appleseed Day, because the story is that Johnny Appleseed planted all the apples along Apple Creek--and Yuri and Galina were given the key to the city.”

Yuri Krolovets, whose mother is chairwoman of the Omsk Savings Bank, observed, “This has been wonderful.”

There have been moments of culture shock, of course. When the Russians arrived in Fairfield in June, they quickly consumed all the fresh fruit in the cafeteria--especially the bananas, a rarity in Moscow--and asked for more.

And despite their instructors’ warnings that they were not to roam off campus, dozens quickly managed to locate Fairfield’s well-stocked shopping malls; they loaded up on video equipment, compact discs and other modern-day delights.

And when the time came to assign the young bankers to their internships, Russian urbanity collided head-on with American reverence for small-town life. For educated Russians, being in the city--preferably Moscow--is everything; being stuck in a small town is the equivalent of banishment. So most of the student bankers wanted to go to New York, Boston or Chicago.

“I can’t even find this place on a map,” grumbled Nikolai L. Chuban, who was assigned to a bank in Maquoketa, Iowa. “I’m afraid it will be underwater.” (It wasn’t.)

Corrigan, long one of the most powerful men in the American banking system, stood in a hall holding a big map to help the visitors find their adoptive towns. He was surprised when one Russian was disconsolate over his assignment: the National Bank of Detroit.

“That’s a very good bank,” Corrigan told him.

“But I came here to learn about the private sector,” the Russian complained. “Why must I go to a national bank?”

There were banking culture shocks too, as the Russians began to realize how much work lies ahead to bring their system in line with the West’s.

“If you’re making a loan here, you have a credit bureau to tell you if the applicant is credit-worthy,” said Chuban, who works for Spiritbank in Tula, a small city south of Moscow. “We don’t have such a thing as a credit bureau.”

Webb, the BankAmerica instructor, stumbled onto another gap: “Equity was a concept they didn’t understand. These are people who don’t own anything. Very few own cars, almost none of them own houses. They were just shocked that you could use the equity in your home to get another loan. That blew them away.”

Andrew Grabowski of Bankers Trust, who has helped privatize state firms in Hungary and the former Czechoslovakia , noted that he “was surprised that they had so little experience in thinking about these problems. But I was very encouraged by how quickly they picked it up. . . . These guys are bankers.”

One tenet of capitalist banking is already quite clear to the Russians: Look for a line of business that will make a profit. And for the present, at least, that is not entirely a good thing: Russia desperately needs to stimulate long-term productive enterprises, but what makes money in the current chaos is likely to be short-term and speculative.

“We lend to small businesses, mostly merchants who buy and sell,” Chuban said.

His employer, the 10-month-old Spiritbank, was launched by a vodka distilling firm.

“Nobody actually produces in Russia today. They just trade,” he complained. But Spiritbank is headed the same way.

“What we really want to do is get into foreign exchange operations,” he said. “That’s what is profitable.”