October 6, 2013

This is bne's Russia banking weekly newsletter, a list of the top stories in region last week. You can receive the list as a plain text or html email or as a pdf file. Manage your delivery options here:http://businessneweurope.eu/users/subs.php

TOP STORY BANKER 1. Latvian banks tied to arms dealing 2. Polish Bank Zachodni looks to buy local rivals - CEO 3. UniCredit eyes Poland's BGZ, might leave Ukraine: CEO 4. Growth Outlook Still Fragile for Major Austrian Banks 5. Q&A with Russian Deputy Finance Minister Alexei Moiseev NEWS BANKER 6. Collapse of mongolian Savings Bank leads to calls for better regulation 7. Q&A with Promsvyazbank, Neil Withers, CFA, Vice-President, Capital Strategy and IR 8. Sberbank Private Banking announces the appointment of Rudolf Scherrer 9. Turkey banks' return to capital markets to show if confidence remains 10. Ukrsotsbank raid highlights western banks' Ukrainian misadventure EA BANKER 11. Georgia banking sector loan growth rebounded in August 12. Kyrgyzstan: Banking Tussle Nearing Resolution? EE BANKER 13. Otkritie Financial Corp buys 24% in affiliate bank for RUB8bn 14. Overdue loans cannot be stopped 15. Renaissance Capital appoints Alexander Merzlenko and Ron Golan as global co-heads of investment banking 16. Russia's Blagosostoyaniye to merge Absolut Bank, KIT Finance H2 in 2014 17. Sberbank Lose-lose dividends dilemma 18. Ukraine banking sector loan growth accelerates in August 19. Uncompleted housing construction adds up 20. VTB Capital named “Most Innovative Investment Bank from Central and Eastern Europe 2013” by The Banker magazine 21. VTB to sell 10% in Rosbank to Societe Generale soon 22. VTB24 to increase mortgage lending SE BANKER 23. Turkish banks Preliminary 3Q13 trends EE BANKER - FROM THE DAILIES 24. Avangard publishes strong 1H 2013 financials 25. Russia can cut state share in banks to below 50% in future 26. Russia's non-state pension fund not to buy GE Money Bank-source 27. Russian cbank revokes license from Moscow-based Swedbank 28. Sberbank increased its stake in Cetelem Bank up to 74% 29. Sberbank opens International Desk in Kazakhstan 30. Sberbank to lend $300m to Turkey's DenizBank CE BANKER - FROM THE DAILIES 31. Czech retail loan growth improves, but still modest 32. Fitch Affirms Slovenska Sporitelna at 'A', Upgrades VR to 'bbb+' 33. Fitch Affirms Three Czech Banks

34. Growth Outlook Still Fragile for Major Austrian Banks 35. Intesa injects HUF 37.5 bln into Hungarian unit CIB Bank 36. Latvian banks tied to arms dealing 37. Polish Bank Zachodni looks to buy local rivals - CEO 38. Polish banks should be smart in buying foreign-owned rivals: central bank 39. Raiffeisen Bank Int.: Clarification on capital strengthening plans SE BANKER - FROM THE DAILIES 40. Lessons From Slovenia’s Public Banking Crisis 41. No bold move from Romania NBR EA BANKER - FROM THE DAILIES 42. ADB backs development of non-cash payments in Azerbaijan 43. Pasha Bank joins Azerbaijan Microfinance Association 44. Mortgage lending in Azerbaijan collapsed by 2.2% in September 45. Azerbaijani bank's average capital exceeds by 43% the capital demand effective from 2014 46. Azerbaijani banking sector's development rates need to be controlled 47. Catastrophic insurance pool to be established in Azerbaijan until late 2013 48. KKB temporarily stops mortgage lending 49. National Bank of Kazakhstan and China Banking Regulatory Commission ink a memo of understanding 50. Sberbank opens International Desk in Kazakhstan 51. Kazakhstan replaces central bank governor 52. First Microcredit gets EBRD loan in Kyrgyz som equivalent to US$ 1.5m 53. Profit of banking sector in Kyrgyzstan reaches $33 mln YTD 54. Mongolia: Collapse of Savings Bank leads to calls for better regulation 55. Tajikistan’s overheated banking system evokes concern, say EDB researchers 56. Uzbek bank plans to attract China Development Bank's credit line worth $100 million

TOP STORY BANKER 1. Latvian banks tied to arms dealing Erste October 3, 2013 Latvia's Financial and Capital Market Commission (FCMC) will investigate the recent news reports on the possible involvement of Latvian banks in servicing Russian and Ukrainian arms deals, and will inspect whether the banks in question have operated in accordance with anti-money laundering regulations, reports Nozare.lv. The FCMC adds that the authors of the report also point out that the mentioning of specific banks in Latvia does not mean they have been involved in illegal activities. According to them, their activities may, in fact, be completely legal. The report says that these arms deals may be deemed illegal only if they have breached international regulations. The FCMC points out that it must still be verified whether any of the Latvian banks mentioned in the report have breached any international regulations. To read the full storyhttp://www.baltictimes.com/news/articles/33495/ 2. Polish Bank Zachodni looks to buy local rivals - CEO Reuters

September 30, 2013 Bank Zachodni WBK, the Polish arm of Banco Santander, wants to continue taking an active role in the consolidation of Poland's financial sector after completing the purchase of rival Kredyt Bank, its chief executive said. "The trend is in the direction of consolidation, to boost the strength of the large banks," Bank Zachodni CEO Mateusz Morawiecki told a news conference. "We are that buying force on the Polish market." Morawiecki, who said he wants to boost Bank Zachodni's No. 3 position on the market, told a Reuters Investment Summit last week that the consolidation of the Polish lenders would cool in the coming year, although more deals would happen within the next five years. To read the full storyhttp://www.reuters.com/article/2013/09/30/bankzachodni-deals-idUSL6N0HQ17520130930 3. UniCredit eyes Poland's BGZ, might leave Ukraine: CEO Reuters October 3, 2013 UniCredit , Italy's largest bank by assets, has submitted a preliminary offer to buy Poland's Bank BGZ and is sounding investors out on the possibility of selling its Ukrainian unit, Chief Executive Federico Ghizzoni said. Ghizzoni, who earlier this year sold Unicredit's Kazakh operation, said this was part of the bank's strategy to strengthen its presence in countries it considers "core" and leave those markets where it sees little opportunity for growth. "We made an offer on a Polish bank, we are still in the early stages," Ghizzoni told a group of foreign reporters in comments embargoed for Thursday morning. He later identified the bank as BGZ, which is owned by Dutch lender Rabobank and could be worth around $1 billion. To read the full storyhttp://www.reuters.com/article/2013/10/03/us-unicredit-ceo-idUSBRE99203720131003 4. Growth Outlook Still Fragile for Major Austrian Banks Fitch September 27, 2013 Long-Term IDRs Affirmed: Following a peer review, Fitch Ratings affirmed the Long-Term Issuer Default Ratings (IDRs) of the four major Austrian banks on 17 September 2013. The IDRs of Erste Group Bank AG (Erste), Raiffeisen Bank International AG (RBI), UniCredit Bank Austria AG (Bank Austria) and Volksbanken Verbund (VB Verbund, including its central institution, Oesterreichische Volksbanken-Aktiengesellschaft (OeVAG)) were all affirmed at 'A' with Stable Outlooks. Sovereign Support Reducing: The IDR affirmation was based on Fitch's view that, as systemically important banks with leading or significant domestic market shares, support from the Republic of Austria (AAA/Stable) is extremely probable if needed. However, Fitch also notes that dynamics with respect to potential future sovereign support are changing across Europe (see Fitch's special report, Bank Support: Likely Rating Paths, published 11 September 2013), which may put pressure on support-driven ratings in the medium term.

Wide Viability Rating (VR) Range: Downside risk from the potential eventual removal of sovereign support in Fitch's ratings is currently limited to one notch for Erste (ie, in the most extreme support scenario, its IDR of 'A' would be downgraded to its current VR of 'a_'), two notches for Bank Austria (VR of 'bbb+') and three notches for RBI ('bbb'). VB Verbund's VR ('bb_') is considerably weaker, reflecting its weaker franchise and continued challenges to reposition the bank following extraordinary support provided to OeVAG in 2012. CEE and Capital Determine Upside: Given the still difficult operating environment across much of Central and Eastern Europe (CEE) and subdued credit demand in Austria, upside potential for the banks' VRs is currently limited. However, stronger core capital ratios, particularly at RBI, and an asset quality trend reversal in the banks' major CEE markets could lead to positive action on the banks' VRs in the medium term. Hungary, Croatia, Romania Downside: The performance in the banks' Austrian home market and many larger CEE markets, notably Poland, the Czech Republic and Russia, remains adequate despite sluggish loan growth; activities in Romania, Croatia and Hungary continue to be loss-making or underperforming. While Romania is showing some first signs of improvement, Fitch expects Hungary and Croatia to remain a drag on profitability in H213. Cost Management Remains Focus: With core revenue under pressure, all the banks have started to contain operating expenses by streamlining their branch networks and disposing of underperforming subsidiaries (Erste in Ukraine, Bank Austria in Kazakhstan). Asset Quality Yet to Stabilise: Non-performing loan (NPL) ratios deteriorated further in H113 in most markets, as a result of sluggish or negative loan growth and continued inflows of net NPLs. Fitch expects a further, albeit more moderate, worsening of asset quality in most markets, including Austria, in H213. While loan deleveraging in CEE has to date not been significant, Fitch does not expect any meaningful loan growth in the short to medium term, which will negatively affect profitability and asset quality ratios (due to the base effect). Improving Funding Profiles: Erste, RBI and Bank Austria's funding positions have improved as a result of efforts to increase local funding in CEE but also due to slow or non-existent loan growth. VB Verbund's funding profile benefits from its primary banks' deposit base and OeVAG's non-core asset wind-down. Wholesale maturities are manageable and ECB funding balances, already moderate, are being actively reduced. 5. Q&A with Russian Deputy Finance Minister Alexei Moiseev Aton September 30, 2013 Our conference concluded with a meeting with Alexei Moiseev, Deputy Finance Minister of Russia • The current deposit insurance system creates a strong moral hazard as the costs of participation are the same for everyone: both the CBR and MinFin would like there to

be risk differentiation but to date the CBR acknowledges that it has no satisfactory methodology • • The law on consumer lending is “under active construction”, with the devil in details: these include how to define the effective full interest rate on a loan (do we include insurance?), how to clearly present all terms and conditions to the borrower etc. • • MinFin does not support artificial caps on lending rates, but very much likes the new CBR measures of large increases of capital weights for high-rate loans • • The law on securitization will be finalized soon; it is a very much needed law though it will not be perfect as it will still be based on the Civil Code, which is still very Soviet, and the latter needs major renovations, according to Moiseev • • The pension money guarantee system will be realized via the Deposit Insurance Agency, much like the current deposit insurance system for banks. However, this system will guarantee the safety of the nominal but not the respective investment return. • • Q: “If a crisis comes, how much money would the banks require (above which the state will not provide)?” ? A: “I can’t see such limit [in other words, there is actually no limit]” ? • Q: “Will dividends of state companies indeed be set at the minimum of 35% of IFRS net profit?” • ? A: “this has been budgeted since 2016, but still needs a lot of work, for instance, amendments to current legislation which states that dividends cannot exceed RAS net profit [which is often very different for the IFRS number]. Moreover, talks with state companies reveal that management considers the company’s money their own, and not shareholders’, and has no desire to part with that money.” ? • Q: “Should the ruble be weakened?” • ? A: “We [MinFin] are not disappointed when the ruble gets weaker.” ? • Q: “What is being done for the strategic development of the financial system as opposed to solving daily problems?” • ? A: “I can’t agree that we don’t do anything strategic: the budget rule introduction, pension fund regulation and oversight construction, the insurance regulation overhaul – these are long-term strategic measures. As for creating an international financial center, significant steps have been taken (Euroclear, pension funds’ access to IPOs, T+2 “at least somehow”, listings…) – but it takes time, look at Poland, these things did not just happen overnight.” ?

NEWS BANKER 6. Collapse of mongolian Savings Bank leads to calls for better regulation South China Morning Post September 27, 2013

It came like an unseasonal Siberian wind from the steppe. Anointed the "Best Managed Bank in Mongolia" by The Asian Banker magazine in April this year, the collapse of Savings Bank, the country's fifth-largest lender, only three months later, has led to calls for further regulation and oversight as the country upgrades its financial services. Branded with a negative outlook by ratings agency Moody's, the banking sector faces challenges, "in managing what will likely be a period of rapid loan growth in an economy that is increasingly exposed to commodity-driven boom-bust cycles", said Graeme Knowd, Moody's associate managing director of financial instruments group at a recent investment forum in the Mongolian capital of Ulan Bator. Read more here: http://www.scmp.com/business/banking-finance/article/1318625/collapse-savings-bank-leads-calls-better-regulation 7. Q&A with Promsvyazbank, Neil Withers, CFA, Vice-President, Capital Strategy and IR Aton September 30, 2013 • Despite the bank’s unsuccessful IPO attempt last autumn (“the market was not there”), going public remains a part of PSB’s longer term strategic plan. The bank believes there is niche market for large non-state public banks up for grabs: Nomos can’t really be considered public at present, and Alfa does not seem to have any IPO plans. • • In terms of when an IPO may be concluded, the ‘when the markets are ready’ retort is tired. As such we were interested that PSB was fairly explicit about when exactly that might be. The bank is waiting for SBER to consistently trade at around 1.5x P/B – and will not just take a two-week rally. • • At the same time, the bank’s current capital position is comfortable, and RoE should enable it to meet planned asset growth. Growth will be in Russia only with no plans for foreign expansion, and all growth will be organic: in PSB’s experience, acquiring smaller banks is not worth the time and effort. • • With respect to the bank’s strategy, Withers reiterated that retail and SME lending remains the bank’s primary focus. The retail segment, which has been completely rebuilt (as the pre-crisis experience with retail was unsuccessful) in the past couple of years, finally became profitable in 1H13, and PSB is optimistic about its prospects. • 8. Sberbank Private Banking announces the appointment of Rudolf Scherrer Sberbank CIB September 30, 2013 Sberbank Private Banking, the business area of the Sberbank Group that provides financial and accompanying services to high-net-worth individuals, announces the appointment of Rudolf Scherrer as Deputy Head of Private Banking. In this role, Rudolf will oversee the development of investment products, middle office operations, the Business Research Service and also the development of the international platform. Rudolf joined the company on September 27, 2013 and reports to Elena Shilina, Head of Sberbank Private Banking.

Rudolf Scherrer joined Sberbank Private Banking from Renaissance Group, where he worked since 2010. In October 2012, he took up the position of Operational Director and Deputy Chairman of the Board of Renaissance Asset Managers. Prior to this he worked for twelve years at Credit Suisse, where he held a number of executive positions in the company’s offices in Switzerland and Russia. In his last role at Credit Suisse he oversaw Products and Projects, Sales Management and the company’s Private Banking Division in Moscow. Rudolf began his career at UBS in 1986 and held various client relationship roles there. “Our task is to build a leading private banking business. To accomplish this we are actively forming a world-class team that features professionals, including from leading global investment firms. In addition to the appointment of Rudolf Scherrer, the expertise possessed by Sberbank Private Banking has also been strengthened by the hiring of Vasiliy Sofiyskiy from Credit Suisse and Anna Tokaeva from UBS Group at the end of last year,” commented Elena Shilina, Head of Sberbank Private Banking. “Today Sberbank Private Banking is one of the most promising employers on the market and offers the best opportunities for growth. This area of business has healthy ambitions and the best client base thanks to Sberbank. I believe that the work that we will perform on improving infrastructure will give an additional boost to the development of the business. I am pleased to become part of the Sberbank Private Banking team and will take great pleasure in addressing the tasks that I have been set,” said Rudolf Scherrer, commenting on his appointment. Additional information: Private banking is a new area of business for the Sberbank Group. The Private Banking Department provides high-net-worth individuals first-class solutions for preserving and enhancing their wealth and that of family members, and also a wide range of non-financial services and lifestyle products. Among the key advantages of the Sberbank Group’s private banking are its client focus, personalised approach, high degree of reliability and full confidentiality, and the open architecture platform used by its products. 9. Turkey banks' return to capital markets to show if confidence remains IHS October 3, 2013 The IHS Banking Risk Team highlights key risks for the emerging market banking sector in the month ahead, specifically for China, India, Hungary, Ukraine, Turkey, Argentina, the UAE and Qatar. For questions/further comment please contact the author of the desired section or the press office via press@ihs.com Turkey – Back to international debt markets | Contact: Tomás Oliveira da Silva, Economist, Tomas.OliveiradaSilva@ihs.com “Turkish banks are likely to return to international debt markets to fund their rapid credit expansion, after a period of absence caused by both the instability generated by the US Federal Reserve's monetary policy decisions and social unrest in Turkey. The next couple of months will define whether Turkey's banks, which rely strongly on both bonds and syndicated loans from abroad, have retained the confidence of currently wary investors.”

Hungary – Headed for another slump | Contact: Tomás Oliveira da Silva, Economist, Tomas.OliveiradaSilva@ihs.com “With Hungarian banks clearly stating that a quick fix to outstanding foreign exchange loans is impossible, negotiations are likely to heat up further in the coming weeks as the 1 November deadline imposed by the government nears. Following more than two years of losses, partly led by previous loan-restructuring schemes and high bank taxes, the Hungarian banking sector is likely heading for another slump. The extent of losses depends on how much of the bill the government is willing to cover.” Ukraine – Macroeconomic & political environment deteriorating | Contact: Tomás Oliveira da Silva, Economist, Tomas.OliveiradaSilva@ihs.com “Ukraine's macroeconomic and political environment is feared to deteriorate in the coming months, as the announcement of the government's preference for an agreement with the European Union has to some extent broken a deadlock that was keeping the country out of the headlines. A very weak economic environment will continue adding pressure on banks, while the stability of the local currency is far from assured and will continue to be monitored closely as depreciation would have significant knock-on effects on the banking sector.” China – Possible boost to regulatory capital from preferred shares; up-tick in securitisation activities | Contact: Ruta Cereskeviciute, Senior Economist, Ruta.Cereskeviciute@ihs.com “The China Securities Regulatory Commission is likely to issue more details on the "soon"-to-be-released regulations regarding preferred shares issuances by the country's banks. Over the next quarters, preferred shares may account for a sizeable portion of a new capital-raising drive by Chinese banks that are facing tighter capital adequacy requirements under Basel III directives. Following an announcement in late August that the Chinese government will extend the trial period and will potentially increase the scale for loan securitisation, more banks are expected to step up efforts to engage in these activities in the near term. Most of the funds generated from securitisation will likely be loaned out to SMEs per the China Banking Regulatory Commission (CBRC) request. There is likely to be a great demand for these investment products as they offer significantly higher interest rates than regular bank deposits.” India – Downgrade of Indian’s banking sector risk rating; foreign funding schemes seek to attract more capital | Contact: Ruta Cereskeviciute, Senior Economist, Ruta.Cereskeviciute@ihs.com “Amid increasing asset quality concerns and a weakening economic outlook, IHS Global Insight Banking Risk Service has downgraded the risk rating for India's banking sector from 30 to 35, leaving it in the "Medium" risk category with ‘Negative’ outlook. Going forward, responding to encouragement from the central bank, Indian banks are likely to continue adjusting their funding strategies over the next month, as they seek to attract more capital from overseas. Banks will likely react vigorously to the Reserve Bank of India's decision in September to double the overseas foreign borrowing limit to 100% of unimpaired Tier 1 capital and open a concessional window for dollar-rupee swap transactions at a discounted price. With the latter scheme to be open until end-November only, the share of foreign liabilities on bank

balance sheets is set to pick up notably in the near term. From the banking sector stability point of view, foreign banks may be the ones building up the highest exposures to direct foreign exchange risk over the next few months.” Argentina – US court battle’s due to reach crucial stage | Contact: Antonio Timoner-Salva, Senior Economist, Antonio.Timoner-Salva@ihs.com “Argentina's holdouts' battle in US courts is due to reach a crucial stage, with the US Supreme Court deciding in the coming weeks on whether to hear their case. Uncertainty surrounding the outcome of both the holdouts' court battle and the upcoming mid-term elections in late October has provoked significant volatility in the banking sector's funding position because of growing unease among domestic depositors. As banks are facing growing difficulties to mobilise term deposits, their funding costs have escalated to levels similar to those observed during the short-lived liquidity crisis of late 2011, when the government introduced partial foreign currency capital controls.” UAE & Qatar – Regulation announcements | Contact Alyssa Grzelak, Senior Economist, Alyssa.Grzelak@ihs.com “The UAE central bank is expected to publish the final version of regulations that seek to restrict lending for mortgages and lending to government-related entities (GREs). The regulations are expected to cap loan-to-value ratios on a first residential mortgage at 75% for foreigners and 80% for local citizens. The limitation on banks' exposure to GREs, meanwhile, is expected to be watered down considerably from the measure originally proposed in 2012. Additional UAE and Qatar-based banks could announce increases in foreign ownership limits ahead of those countries' formal inclusion in the Morgan Stanley Capital International Emerging Market Index. Although improving economic fundamentals in the United Arab Emirates will help provide GREs with the funds needed to meet some looming debt payments, given the estimated USD30 billion coming due in 2014, it is likely that additional restructuring deals will be announced in the near term. The transparency surrounding and success of these rollovers will have important implications for the UAE banking sector given banks' elevated exposure to these entities.” 10. Ukrsotsbank raid highlights western banks' Ukrainian misadventure bne September 27, 2013 As if a looming financial crisis in Ukraine weren't enough to deal with, UniCredit Group is also having to deal with a dangerously escalating row between its Ukrainian subsidiary and a major debtor. The Italian bank is now looking increasingly likely to join other European banks that have left the country, licking their wounds. Ukrsotsbank, Ukraine's sixth largest bank by assets, has accused the country's fraud squad of exceeding its powers during a raid on its Kyiv headquarters on September 20, which was carried out in connection with a court case brought by a major debtor of the bank. This is the first time a major European-owned bank has been raided by police in Ukraine and indicates that a wave of conflicts between international banks and debt welshers that have erupted since the economic crisis broke in 2008 shows few signs of abating

"The bank expressed readiness to provide all documents and information regarding the request, but the officers launched an active inspection and ensuing removal of documents and computers from all premises of the central bank offices, including those not on the court list," Ukrsotsbank said in a statement September 23. "The bank regards such behaviour during a search as an abuse of power such precedents fundamentally spoil not only the image of the bank but also the business climate for European investors." The root of the conflict is a whopping $190m lent by Ukrsotsbank to ISA Prime Development and a string of related companies to build office towers in 2005-2007 in fact, before UniCredit purchased the bank in 2007. According to Ukrsotsbank, ISA Prime stopped servicing the debt after the crisis hit Ukraine in 2008, and it has since allegedly tried by hook or by crook to remove its properties that are under pledge to the bank. The court order backing the September 20 raid on Ukrsotsbank derives, ironically, from a criminal investigation into theft of Ukrsotsbank property that was prompted by a complaint from the bank itself. In an escalation in the dispute, ISA Prime's founder and CEO, Oleksandr Bashenko, leaked police documents to the press that were published on September 24, which he claims prove wrongdoing by the bank, suggesting this criminal case could backfire on the bank.

EA BANKER 11. Georgia banking sector loan growth rebounded in August UralSib October 3, 2013 deposit growth remains strong — despite lower interest rates — we see positive cross-read for BGH News: In August, Georgian banks’ portfolios renewed their growth supported by 0.5% MoM GEL devaluation, NBG statistics suggest. The corporate portfolio was up 0.7% MoM, after the 2.0% decline in July. The retail loan book increased 3.4% MoM, accelerating from 2.1% MoM in the previous month, although the consumer loan portfolio increased only 1.1% MoM and the growth in mortgage loans decelerated to 1.8% (from 2.0% in July). Excluding the FX factor, portfolios grew 0.3% and 3.2%, respectively, showing muted demand in the corporate segment. Deposit base expansion stayed strong: retail deposits increased 1.2% MoM (but down from the 2.6% expansion in June) and corporate accounts increased 2.6% MoM (up from 2.3% MoM in July). Average deposit rates declined further to 6.0% (from 6.6% in July and 6.9% in June), whereas average lending rates have stayed flat in the last two months. Overdue loans increased 1.3% MoM driven by the retail segment, while provisions expanded 2.8% MoM, increasing the coverage. Our View: The statistics likely reflect seasonal weakness in demand that we think will strengthen in autumn and after the presidential elections at the end of October.

Meanwhile, the further decline in deposit rates is positive for banks’ NIM, with BGH likely to benefit given its large pile of liquidity. Meanwhile, this could be offset by high LLP. The further deterioration in asset quality and increase in coverage suggest elevated CoR, that might stay intact until the macroeconomic situation improves. 12. Kyrgyzstan: Banking Tussle Nearing Resolution? EurasiaNet September 27, 2013 A long-running conflict between Latvian banker Valeri Belokon and the government of Kyrgyzstan seems to be heading toward its denouement. In an interview with EurasiaNet.org, Belokon said an arbitration hearing was scheduled for late December in Paris to resolve his dispute with Kyrgyz authorities. The legal tussle stems from the Kyrgyz government’s takeover of Manas Bank following the 2010 ouster of former Kyrgyz president Kurmanbek Bakiyev. “There should be a decision not too long after that,” Belokon said, referring to the hearing. Read more here: http://www.eurasianet.org/node/67553

EE BANKER 13. Otkritie Financial Corp buys 24% in affiliate bank for RUB8bn bne September 30, 2013 Russia's Otkritie Financial Corporation has acquired 24.17% in Bank Otkritie from the Deposit Insurance Agency (DIA) for RUB7.915bn, the DIA said in a report seen by Prime. Otkritie Financial Corporation drove its stake to 85.69% in the affiliated bank, where the IFC owns 14.3%. Otkritie Financial Corporation was the main contender for the stake, as it pledged to buy it in case there are no other bidders. 14. Overdue loans cannot be stopped bne October 3, 2013 Between January and August 2013, the total amount of homogeneous loans with payments overdue by more than 90 days in retail loan portfolios of Russian banks increased 44.1% to RUB481.9bn, including by 4.8% in August, according to the Bank of Russia, Vedomosti reports. The proportion of overdue loans increased from 4.6% to 5.5%. The increase in August is 0.2 percent. 15. Renaissance Capital appoints Alexander Merzlenko and Ron Golan as global co-heads of investment banking Renaissance Capital October 4, 2013

Renaissance Capital, the leading emerging markets investment bank, has announced today that Alexander Merzlenko and Ron Golan will become Global Co-Heads of Investment Banking. They will report directly to Igor Vayn, Chief Executive Officer of Renaissance Capital. Alexander Merzlenko, is a 13-year veteran of Renaissance Capital, having joined the Firm in 2000. He was appointed as Head of Russian Investment Banking and Financing in 2009. In December 2012, Mr. Merzlenko became President of Renaissance Capital Russia, and will retain this position with his new appointment. Ron Golan joined the Firm in 2012 as the Head of Investment Banking London and Africa. Prior to that, he spent 15 years at Morgan Stanley in several senior positions, including head of investment banking coverage for Israel, Central and Eastern Europe and Africa. Igor Vayn, the Chief Executive Officer of Renaissance Capital said, “The promotions reflect the significant achievements and leadership exhibited by Alexander and Ron in their current roles. They are outstanding and talented bankers who have helped lead our investment banking business and drive excellent results in a challenging market environment. I am confident that under their leadership, Renaissance Capital and its investment banking division will continue to thrive across our territories, and wish them every success in continuing to win market share and grow our business.” Russia and Africa are the core geographies for Renaissance Capital. Among its most recent deals in Russia is the placement of a $7bn eurobond for the Russian Federation - the largest emerging markets bond issue year to date. In Africa, Renaissance Capital was the sole and exclusive financial advisor and broker on the sale of a 1.5% stake for $289mm of Dangote Cement shares to the Public Investment Corporation (SOC) Limited of South Africa. The sale was the largest single trade ever executed on The Nigerian Stock Exchange. 16. Russia's Blagosostoyaniye to merge Absolut Bank, KIT Finance H2 in 2014 bne September 30, 2013 The Blagosostoyaniye pension fund belonging to Russian Railways will merge KIT Finance bank and Absolut Bank, both of which it controls, in July-December 2014, Executive Director of the fund Yury Novozhilov said on Monday. "We have never hidden the fact that we are considering merging KIT Finance and Absolut Bank. But maybe it will happen in the middle of 2014 when KIT Finance completes its financial rehabilitation plan," Novozhilov said, cited by Prime. Novozhilov said that Blagosostoyaniye has no plans to sell Absolut Bank. "It was a successful investment, an investment with real value," he said. 17. Sberbank Lose-lose dividends dilemma UralSib October 3, 2013 Gref warns of need for additional capital in case of 35% dividend payout. At the Sochi forum on Friday, Sberbank’s (SBER RX – Buy) CEO German Gref was less than

enthusiastic towards the 35% dividend payout proposed by the Finance Ministry for state companies, starting from 2016. Gref stated that Sberbank would need additional capital should it be compelled to raise the payout from 20% to 35%, emphasizing that approaching the market to raise new capital would be a pretty tough task. His counterpart at VTB (VTBR LI – Hold), Andrei Kostin, sounded a different tone, saying that VTB is ready to pay 35% of net income. Formally, the government’s decision on dividends affects only VTB but not CBR-controlled Sberbank; however, Gref’s comments imply that 35% dividends are not completely out of the question. A 20-30 bps impact on CAR does not look so critical ... In a rough calculation, we found that a 35% payout instead of 20% would strip the bank of 20-30 bps in Tier 1 CAR in 2016. This figure does not appear to be too critical (we currently model 2015E Tier 1 CAR at 11% and expect it at around the same level in 2016) and should not lead the bank to immediately put the brakes on lending activity, as Gref cautioned. At the same time, it is not completely clear if the introduction of Basel II requirements in IFRS will bring the ratio closer to 10%. Under RAS, we also do not expect any difficulties emerging (seeing N1.1 above 8% in 2015 and N1.0 close to 13%). … however Gref’s grim outlook still triggers alarms bells. Sberbank finds itself in a sort of lose-lose situation here, in the sense that a lower payout makes the stock relatively less attractive to investors compared to other state companies which could offer higher dividends. At the same time, should Sberbank be compelled to payout a 35% dividend and for the sake of keeping a comfortable CAR raise new equity, then this would also be unwelcome news for the stock price. Although the potential raise is several years away, the market could very well start pricing it in now. We reiterate our view that VTB’s discount to Sberbank on 2013E P/BV have widened too much (almost 50%) and we expect it to reverse closer to 40% in the next few weeks. Natalia Berezina 18. Ukraine banking sector loan growth accelerates in August UralSib October 3, 2013 corporate accounts expectedly declined MoM – positive News: Ukrainian banking sector data for August, published by the NBU, suggest an improvement in loan portfolio growth after the deceleration in July. Corporate portfolio expansion returned to 1.2% MoM (6.8% YoY) growth, while the retail loan book growth accelerated to 1.1% MoM from 0.5% the previous month, with the YoY expansion staying in positive territory (1.7%) for the third consecutive month. Retail deposits continued growing at 1.1% MoM, while corporate accounts expectedly declined 0.8% MoM after the 3.6% MoM increase in July. Our View: Further recovery in retail lending (mostly in consumer loans) supported by real wage growth is a positive sign, with corporate loans also showing strong performance. We are therefore reiterating our cautious view on sector performance in 2013. However, we believe that solid demand in consumer lending will likely support OTP bank operations with bank's core Hungarian and Russian markets growth likely to stay muted in the near term.

19. Uncompleted housing construction adds up Belarus in Focus October 1, 2013 Interest rates on loans to finance housing construction went up to 38.5% per annum. Citizens can no longer afford loans for housing construction. The limit on concessional loans for the needy for 2013 might be reached in September. As most of the housing construction in Belarus is carried out using loans, fewer loans will result in uncompleted housing construction sites mushrooming all over the country. Read more here: http://belarusinfocus.info/p/6051 20. VTB Capital named “Most Innovative Investment Bank from Central and Eastern Europe 2013” by The Banker magazine VTB Capital October 4, 2013 VTB Capital has been named the "Most Innovative Bank from Central and Eastern Europe 2013" at the annual Investment Banking Awards organised by The Banker magazine. The ceremony took place in London. The Investment Banking Awards set the standard of quality for the international banking community. The awards are presented by The Banker magazine, which has been one of the UK’s leading financial publications since 1926. The Banker’s prestigious international award is further acknowledgement of VTB Capital’s expertise and the leading role it has on the Russian investment banking market. This is evidenced further by VTB Capital being ranked first in Dealogic’s Q3 2013 league tables in the debt and equity capital markets, as well as M&A advisory in Russia and the CIS. VTB Capital also took the leading positions in Thomson Reuters’ rankings of M&A consultants worldwide. Alexei Yakovitsky, Global CEO of VTB Capital, said: "The award presented by The Banker magazine is one of the most prestigious in the international financial market, and for us it is very important that VTB Capital’s success has been recognised and appreciated by the professional community."? Other accolades VTB Capital has received this year include Euromoney Award for Excellence 2013 in the "Best Investment Bank in Russia" category. In February, VTB Capital was also honoured at Global Finance magazine’s World's Best Investment Banks awards, where it won ”Best Investment Bank in Russia" and "Best Investment Bank in Central and Eastern Europe". 21. VTB to sell 10% in Rosbank to Societe Generale soon bne September 27, 2013 Russia's state-controlled VTB will close a deal to sell 10% in Rosbank to France's Societe Generale in the coming weeks, and receive a stake in the Moscow Exchange and some other assets in exchange, VTB CEO Andrei Kostin said, Prime reported. "I think that the deal will be concluded in September or early October," Kostin said.

Societe Generale, which owns 82.4% in Rosbank, will transfer the stake in the stock exchange, loans to large companies, and property in Moscow and St. Petersburg to VTB. 22. VTB24 to increase mortgage lending bne October 2, 2013 VTB24 may increase its mortgage loan portfolio to RUB450bn as of the end of 2013, Senior Vice President of VTB24 Andrei Osipov said, Vedomosti reported. "With such portfolio, we expect to have a market share of 16.5-16.6%," he said. VTB24 has already granted more than RUB400bn. The portfolio as of beginning of 2013 was RUB331.3bn, according to the bank's data. During this year, the portfolio may increase 36%, mortgage loans to be granted to the amount of RUB230bn.

SE BANKER 23. Turkish banks Preliminary 3Q13 trends Renaissance Capital October 6, 2013 3Q13 summary – duration gap weighing on margins, weak asset quality and more AfS losses. In this report, we take a sneakpeek at preliminary 3Q13 trends among the Turkish banks in our coverage universe. We believe 3Q13 will offer no surprises for the banking sector. We expect the duration gap to lead to up to a 200-bpt contraction in lira loandeposit spreads. Asset quality looks worse to us than in 2Q13 (see Figures 1- 4), and we also note the NPL provisioning ratio is 1-2 ppts higher QoQ. Last but not least, we think climbing rates will continue to limit book value growth through lower QoQ available for sale (AfS) reserves, although not as much as in 2Q13. ? Signs of recovery in loan pricing...New product spreads have climbed to late-May levels, giving us hope that there is more to come (Figure 10). That said, time will show if this leads to better bottom-line profitability, as higher rates could be a knee-jerk reaction to the still-high cost-of-risk (CoR) burden in the sector, as well as the regulator’s new proposals for credit cards. Although we think rising spreads (particularly in commercial loans) are good news, they are not yet sufficient for us to change our estimates, which already assume some recovery. ? ...overshadowed by still-poor asset quality. NPL growth in the sector is higher than in 2Q13 and NPL provisioning coverage has also gone up. This will lead to a higher QoQ CoR burden for banks. Depending on the economic outlook, we believe the pace of NPL inflows could increase in 2014, given lira weakness, which will make life more difficult for corporates. ? AfS portfolio losses will continue to limit book value growth. The two-year local currency rate is up by 66 bpts since the end of 2Q12, which means banks will continue to book losses on their AfS portfolios. Nevertheless, we

think losses should be much more contained vs 2Q13, when aggregated losses for the six large banks were TRY5.7bn. ? Volume trends are stronger than we had expected. 22% YtD loan growth beats our expectations, and is supported by 15% YoY deposit growth (Figure 5), which is at levels above low-growth years such as 2012. Higher real rates on deposits are positive news for savings growth in Turkey. ? We maintain our cautious stance. Our 2013E EPS forecasts for the banks under our coverage are, on average, 12% below Bloomberg consensus (furthermore, we even see downside risk, due to NIM and CoR in 2H13E), and our 2014 EPS forecasts are 16% below consensus. We forecast no earnings growth for the sector in 2013 and 2014 (we see a flat or slightly lower bottom line for our coverage in both years). We think the current P/B multiples of Turkish banks, on a par with the emerging market (EM) banks universe, and P/E multiples, at a premium to EM banks (on our numbers), suggest that the sector is at best fairly valued.

EE BANKER - FROM THE DAILIES 24. Avangard publishes strong 1H 2013 financials Foyil Securities September 2, 2013 Avangard (AVGR LI), a leading Ukrainian egg producer, has announced its financial results for 1H 2013. The company's revenues grew by 7% y/y to USD 304m, while its EBITDA increased by 10% to USD 135m, with EBITDA margin of 44% (+1.2 p.p. y/y). Net income grew by 8% to USD 106m, and net income margin was 34.7% (+0.3 p.p. y/y). Net cash flow from operating activities was down to USD 79.3m (USD 147.2m in 1H 2012) due to an increase in advance payments and trade receivables, as well as a decrease in trade payables. The company's total debt position amounted to USD 315m (-11% YTD) and net debt to USD 156m (+5% YTD) at the end of 1H 2013, with the total debt to LTM EBITDA ratio of 1.1x, which is far below 3.0x Eurobond covenant. Our view: The news is POSITIVE for the company's stock, as Avangard managed to return to profitability in 1H 2013. Avangard experienced margins growth in 2Q 2013 owing to an export sales increase of 117% y/y to USD 77m (USD 36m in 2Q 2012), which offset the margins squeeze seen in 1Q 2013 due to a drop in shell eggs selling prices by 8% y/y to UAH 0.68 (net of VAT) per piece. Avangard is expecting a total revenue of USD 690m, EBITDA of USD 300m (margin of 43%-44%) and net income of USD 245m (margin of 35%-36%) in 2013. Avangard's stock is currently traded at 3.0x of 2013 P/E and 2.9x of 2013 EV/EBITDA with 44%-48% discount to Ukrainian agro peers (5.8x and 5.1x, respectively) and 59%-77% discount to global peers (13.4x and 6.8x, respectively). We maintain our BUY recommendation on AVGR with the target price of USD 20.2 per share, implying an upside of 102% to the current market price. Ivan Panin 25. Russia can cut state share in banks to below 50% in future bne October 3, 2013

Russian President Vladimir Putin said Wednesday that it is possible to decrease the government's stakes in state-run banks to below 50% in the future. "I think it is possible in the long term. But it must be done carefully," Putin said, cited by Prime. Putin also has not ruled out that the decisions regarding the privatization of some large assets could be made by the end of the year. "Nothing is crossed out from the privatization program forever. The government is monitoring the current (market) conditions and the result that we can receive through the sale of these or others assets," Putin said. 26. Russia's non-state pension fund not to buy GE Money Bank-source bne October 1, 2013 Private pension fund Blagosostoyanie, which owns KIT Finance and Absolut Bank, has given up on plans to buy the Russian unit of U.S.' General Electric, GE Money Bank, Prime reported citing a source close to Absolut Bank. "The non-state pension fund refused to buy the bank as it highly depends on the parent company's funding. Besides, one of the terms put forward by the vendor, was to retain the staff for a year," the source said. Daily Kommersant reported in September that the fund was interested in GE Money Bank. The fund's CEO Yury Novozhilov then said that the fund was eyeing the asset, but the parties failed to agree upon the price. 27. Russian cbank revokes license from Moscow-based Swedbank bne October 1, 2013 The Russian central bank has cancelled the license of Swedbank, a Moscow-based unit of Swedish banking group Swedbank, according to the regulator's statement seen by Prime. Swedbank announced its plans in August to curb its activities in Russia and formally requested that the central bank withdraw its license. 28. Sberbank increased its stake in Cetelem Bank up to 74% Sberbank CIB October 1, 2013 Sberbank and BNP Paribas Personal Finance completed a deal under which Sberbank increased its stake in Cetelem Bank up to 74%. As previously announced on July 18, 2013, Sberbank and BNP Paribas Personal Finance agreed to expand the activity of their joint venture (Cetelem Bank) after its good performances in the Russian car financing market. Sberbank has strengthened its strategic positions in the car loan market by transferring its car loan business, generated through partnerships with car manufacturers and car dealers (9 programs

in total), to Cetelem Bank. In accordance with the terms of the transaction, Sberbank had to increase its stake in Cetelem Bank in 2013 from 70% up to 74% leaving the governance unchanged. After three years, Sberbank has an option to increase its stake in the Cetelem Bank up to 80% subject to achieving certain agreed business performance metrics. The transfer is a part of a large-scale internal reorganization within Sberbank Group. Sberbank will continue issuing car personal loans at its branches. The car loan partnership programs with car manufacturers and car dealers are being transferred from Sberbank to Cetelem Bank. This specialization is part of the bank’s retail strategy and will allow Sberbank Group to improve its presence in the car loan market, an important market for Sberbank. The transfer started in July 2013 and continues smoothly in accordance with expectations. Before the end of this year Cetelem Bank will transfer all Sberbank’s car partner activity with concentrated effort to assure a personalized relationship with each of them. In parallel, Cetelem develops its car loan business using its own sales potential and has already started 4 new programs with car manufacturers on top of what is transferred from Sberbank. 29. Sberbank opens International Desk in Kazakhstan Sberbank CIB October 3, 2013 October 3, 2013 3 October 2013, Astana – Sberbank, Russia’s largest bank, has opened an International Desk in the Republic of Kazakhstan.This branch will be focused on foreign customers working in Kazakhstanand will also serve Turkish customers. The International Desk’s branches are located in Astana and Almaty, The current portfolio of customers with international assets is $300m. Trade turnover between Kazakhstan and Turkey in 2012 amounted to $4.9bn. In 2007 it was 1.9bn dollars. According to the Statistics Agency of the Republic of Kazakhstan, there are 1,410 companies in Kazakhstan which operate within the Turkish capital, with more than 45,000 employees. At the same time, the number of Kazakh companies operating in Turkey has reached 150. Sergey Gorkov, Deputy Chairman of the Board of Sberbank commented: “The Turkish desk in Kazakhstan is the first time that the synergy effect of the international businesses of Sberbank has been seen. We intend to continue the establishment of international desks at our subsidiary banks, as we see a number of opportunities, among them - to provide comprehensive solutions and services to the multinational companies, the development of cross-border business and the provision of consultancy services to introduce companies to markets in other countries”. The opening ceremony of the new desk was held as part of the Kazakh-Turkish Business Forum, ‘Astana-Istanbul – Expanding the Cooperation’ organized by Sberbank Group, which includes, in particular, subsidiary banks in Kazakhstan (JSC "Sberbank") and in Turkey (DenizBank). 30. Sberbank to lend $300m to Turkey's DenizBank

bne October 1, 2013 Sberbank will provide a $300m loan to its subsidiary, Turkey's DenizBank, Bloomberg reported late on Monday. The interest rate of the 10-year loan was set at 7.49% annually. In September 2012, Sberbank closed a deal to acquire DenizBank, Turkey's fifth largest private bank in terms of assets, for ˇ3bn.

CE BANKER - FROM THE DAILIES 31. Czech retail loan growth improves, but still modest Citi October 1, 2013 Though the money supply (M2) decelerated to 4.9%YoY in August from 5.1% a month ago and 6.7% a year ago, the stock of private loans increased by 2.7%YoY, driven by an acceleration of business loans to 1.2%YoY from zero a month ago (the growth of household loans remained stable at 4%YoY). Though loan growth has recently been driven mainly by loans to non-residents, August data showed some improvement in local loans, including business loans. While the carryover effect suggests dynamics in business loans are virtually unchanged in 4Q13, the growth of household loans would decelerate to 2.8%YoY, which suggests loan growth will remain lackluster in coming months. Moreover, developments in interest rates do not suggest any change: While the spread between the interest rate on outstanding loans to non-financials and the central bank policy rate (0.05%) has gradually decreased to 313bp in August from 332bp after the last cut in the CNB's policy rate in November last year, the spread between the interest rate on new loans to non-financial companies (vs. CNB's policy rate) increased to 177bp in August from 150bp in April this year. Although this adverse development likely halted in September after the US Fed elected not to start the tapering of its LSAP, this is likely only temporary. Hence, if there is not a stronger recovery in the Czech economy, the interest rate channel in the Czech monetary conditions is likely to remain a headache for the CNB's monetary policy, which suggest a stronger increase in its policy rate in early 2015. 32. Fitch Affirms Slovenska Sporitelna at 'A', Upgrades VR to 'bbb+' Fitch October 1, 2013 Fitch Ratings has affirmed Slovenska Sporitelna's (SLSP) Long-term Issuer Default Rating (IDR) at 'A' with a Stable Outlook. The Viability Rating (VR) has been upgraded to 'bbb+' from 'bbb'. A full list of rating actions is at the end of this comment. KEY RATING DRIVERS: IDRS AND SUPPORT RATING_SLSP's IDRs are equalised with those of its 100% ultimate shareholder, Erste Group Bank AG (Erste, A/Stable), Fitch classifies SLSP as a 'core' subsidiary for Erste, given the high strategic importance to the group and level of integration with the parent, as well as the subsidiary's geographical proximity and full ownership by Erste. The Stable Outlook on SLSP's Long-term IDR reflects that on Erste.

The Support Rating of '1' reflects Fitch's view that there is extremely high probability that support from Erste would be forthcoming if needed. RATING SENSITIVITIES: IDRS AND SUPPORT RATING _SLSP's IDRs could be upgraded in case of an upgrade of Erste's IDRs. However, this is unlikely in the foreseeable future, as Erste's Long-term IDR is at its Support Rating Floor and is driven by potential sovereign support. In Fitch's view, there is a clear intention to ultimately reduce state support for systemically important banks in Europe. This has been demonstrated by a series of policy and regulatory initiatives at the European Union level aimed at curbing systemic risk posed by the banking industry. This might result in Fitch revising Support Rating Floors (SRFs) downwards, although the timing and degree of any change would depend on jurisdiction-specific developments. If the agency changes its view about the propensity of the Austrian authorities to provide support to the major Austrian banks, this would lead to downward pressure on their IDRs, Support Rating and SRFs. Fitch has recently detailed its current thinking about sovereign support for banks in two special reports ('The Evolving Dynamics of Support for Banks' and 'Bank Support: Likely Rating Paths', both dated 11 September 2013). Fitch has stated that in cases where sovereign support is seen as weakening, any rating actions will most likely be preceded by Outlook revisions to IDRs, potentially as soon as Q413. KEY RATING DRIVERS: VR_The upgrade of SLSP's VR reflects the bank's underlying credit strengths and the relative resilience of the bank's performance in 2012 and H113 to pressures from a slowing economy and increased fiscal burden. Fitch views SLSP's capitalisation as strong given the bank's risk profile. The Fitch core capital (FCC) ratio improved over 2012 and H113 to a quite comfortable 21.3% at end-H113 (end-2012: 20.4%; 2011: 15.11%), equally driven by profits retention (60% and 40% of net income was retained in 2011 and 2012, respectively) and the decrease in capital requirement for credit risk. Fitch believes that funding is a key strength for SLSP. Customer deposits, predominantly from retail customers, are the major funding source, making up 84% of total funding at end-H113. The loans-to-deposit ratio was a comfortable 84% at end-H113, and liquid assets covered around 45% of customer deposits. SLSP is a net borrower from the group, but group funding still only comprised a small 4.4% of liabilities.__SLSP's non-performing loans (NPL) ratio improved materially to 5.1% of gross loans at end-H113 from 6.3% at end 2012 (2011: 7.6%), however this reduction has been driven mainly by write-offs and NPL sales. In Fitch's view, underlying asset quality remained stable over H113. The coverage ratio of impaired loans increased to a strong 96% over H113, and uncovered impaired loans accounted for a small 1.5% of FCC at end-H113.__Performance in H113 and 2012 was resilient as a reduction in loan impairment charges offset the imposition of the bank levy (the net effect of which in 2012 was around 8% of adjusted pre-impairment operating profit), and margin pressure. Pre-impairment operating profit and net income were a solid 2.47% and 1.59%, respectively, of average assets in H113 (2012: 2.51% and 1.62%). Performance in H213 and 2014 is likely to be somewhat weaker due to regulatory driven reduction of fee income and potential reinforcement of the payments into the

Deposit Protection Fund, which were temporarily suspended for H212 and 2013, but Fitch expects the bank's core profitability to remain in line with 'bbb+' rated peers. RATING SENSITIVITIES: VR _Fitch considers further changes in the VR as unlikely at present. A further upgrade would require material improvement in the operating environment, supporting business growth and asset quality, while other key credit metrics including capitalisation, funding and liquidity remain at strong levels. A downgrade of the VR could result from significant losses on larger credit exposures, or a significant deterioration in the operating environment. The rating actions are as follows: Long-term IDR: affirmed at 'A', Outlook Stable_Short-term IDR: affirmed at 'F1'_Viability Rating: upgraded to 'bbb+' from 'bbb'_Support Rating: affirmed at '1' 33. Fitch Affirms Three Czech Banks Fitch October 1, 2013 Fitch Ratings has affirmed the Long-term Issuer Default Ratings of three Czech Republic banks: Ceska Sporitelna (CS) at 'A', Komercni Banka (KB) at 'A-', and Ceskoslovenska Obchodni Banka (CSOB) at 'BBB+'. The Outlooks are Stable. The agency has also affirmed the banks' Viability Ratings (VRs) at 'bbb+'. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS: IDRS AND SUPPORT RATINGS_CS's and KB's IDRs and Support Ratings are driven by potential support from their parent banks. CSOB's IDRs are driven by its VR, but also underpinned at the 'BBB+' level by potential shareholder support. CS's Long-term IDR is equalised with that of its 98% shareholder, Erste Group Bank AG (EB, A/Stable/a-), reflecting what Fitch views as an extremely high propensity to provide support to CS, if needed. Fitch classifies CS as a 'core' subsidiary for EB in light of the high level of integration between CS and EB, CS's significant contribution to the group's balance sheet and income statement, the geographical proximity of the Czech and Austrian markets, the high strategic importance of the broader Central and Eastern Europe (CEE) region for EB, and EB's almost full ownership of CS. KB's Long-term IDR is driven by potential support from its majority shareholder, Societe Generale (SG; A/Stable/a-). Fitch classifies KB as a 'strategically important' subsidiary for KB given the strategic importance of the broader CEE region for SG, KB's role as SG's largest and best performing subsidiary in the CEE, common branding of SG and KB, and SG's majority ownership of the subsidiary. SG holds a 60% stake in KB, with the remainder broadly held. CSOB's Long-term IDR is underpinned by potential support from its sole shareholder, KBC Bank (KBCB; A-/Stable/bbb+). Fitch classifies CSOB as a 'strategically important' subsidiary for KBCB given the latter's strong commitment to the Czech market, the significant level of integration between the parent bank and CSOB, its importance for KBCB's overall operational performance, the brand association between the two banks and full ownership of CSOB. KBCB has recently established the Czech Republic as one of the group's three business units (alongside the home Belgian market and international markets), underlining the high strategic importance of CSOB.

RATING SENSITIVITIES: IDRS AND SUPPORT RATINGS_Each of the three banks could be upgraded in case of an upgrade of parent bank ratings. However, this is unlikely in the foreseeable future, as the parent banks' Long-term IDRs are each driven by potential sovereign support, and, in Fitch's view, there is a clear intention to ultimately reduce state support for systemically important banks in Europe. This has been demonstrated by a series of policy and regulatory initiatives at the European Union level aimed at curbing systemic risk posed by the banking industry. This might result in Fitch revising parent banks' Support Rating Floors (SRFs) downwards, although the timing and degree of any change would depend on jurisdiction-specific developments. If the agency changes its view about the propensity of the relevant authorities to provide support to the parents of each of the three banks, this would lead to downward pressure on the parent banks' IDRs, Support Rating and SRFs. Fitch recently detailed its current thinking about sovereign support for banks in two special reports ('The Evolving Dynamics of Support for Banks' and 'Bank Support: Likely Rating Paths', both dated 11 September 2013). Fitch has stated that in cases where sovereign support is seen as weakening, any rating actions will most likely be preceded by Outlook revisions to IDRs, potentially as soon as Q413. CS's and KB's Long-term IDRs could be downgraded in case of a downgrade of their parent banks' IDRs. CSOB's Long-term IDR could be downgraded only if both its VR and KBCB's Long-term IDR were downgraded. CSOB's Long-term IDR could also be upgraded in case of an upgrade of its VR. KEY RATING DRIVERS: VIABILITY RATINGS_The banks' VRs reflect their broad domestic franchises and leading market positions (the three banks altogether accounted for around 57% of sector assets at end-H113), their track records of solid profitability, stable asset quality, sound capital and liquidity positions, moderate loan/deposit ratios (in the 70%-80% range) and low refinancing risk. The VRs also factor in the sluggish current performance of the Czech economy (Fitch forecasts a further 1% contraction of GDP in 2013, after a 1.2% reduction in 2012, before a return to growth of 1.2% in 2014) and its high exposure to any deterioration in the performance of the eurozone. In addition, the VRs consider the banks' sizable exposure to the property market, mainly through residential mortgage lending, although direct exposure, both on- and off-balance sheets, to the construction and real estate (CRE) sectors is also significant for all three banks in the range of 75%-95% of Fitch core capital. The declines in property prices in the Czech Republic were limited in 2011-Q113, after a marked drop in 2009-2010, and the loan impairments in the CRE lending categories of all three banks are currently manageable, markedly below the sector average levels. The VRs also take into account continued pressure on margins due to slow growth, competition and the low interest rate environment. RATING SENSITIVITIES: VIABILITY RATINGS_An improvement in the performance and outlook for the Czech economy, coupled with continued strong financial metrics at the banks, could generate upside potential for the VRs. The banks' VRs would at their current levels likely be resilient to a moderate further deterioration in the operating environment. However, in case of a sharp deterioration

in the performance of the eurozone, or a deeper and more prolonged recession in the Czech Republic than Fitch currently anticipates, the VRs could be downgraded. The rating actions are as follows: Ceska Sporitelna_Long-term foreign currency IDR: affirmed at 'A'; Outlook Stable_Short-term foreign currency IDR: affirmed at 'F1' _Support Rating: affirmed at '1'_Viability Rating: affirmed at 'bbb+' Komercni Banka_Long-term foreign currency IDR: affirmed at 'A-'; Outlook Stable_Short-term foreign currency IDR: affirmed at 'F1' _Support Rating: affirmed at '1'_Viability Rating: affirmed at 'bbb+' Ceskoslovenska Obchodni Banka_Long-term foreign currency IDR: affirmed at 'BBB+'; Outlook Stable_Short-term foreign currency IDR: affirmed at 'F2' _Support Rating: affirmed at '2'_Viability Rating: affirmed at 'bbb+' 34. Growth Outlook Still Fragile for Major Austrian Banks Fitch September 27, 2013 Long-Term IDRs Affirmed: Following a peer review, Fitch Ratings affirmed the Long-Term Issuer Default Ratings (IDRs) of the four major Austrian banks on 17 September 2013. The IDRs of Erste Group Bank AG (Erste), Raiffeisen Bank International AG (RBI), UniCredit Bank Austria AG (Bank Austria) and Volksbanken Verbund (VB Verbund, including its central institution, Oesterreichische Volksbanken-Aktiengesellschaft (OeVAG)) were all affirmed at 'A' with Stable Outlooks. Sovereign Support Reducing: The IDR affirmation was based on Fitch's view that, as systemically important banks with leading or significant domestic market shares, support from the Republic of Austria (AAA/Stable) is extremely probable if needed. However, Fitch also notes that dynamics with respect to potential future sovereign support are changing across Europe (see Fitch's special report, Bank Support: Likely Rating Paths, published 11 September 2013), which may put pressure on support-driven ratings in the medium term. Wide Viability Rating (VR) Range: Downside risk from the potential eventual removal of sovereign support in Fitch's ratings is currently limited to one notch for Erste (ie, in the most extreme support scenario, its IDR of 'A' would be downgraded to its current VR of 'a_'), two notches for Bank Austria (VR of 'bbb+') and three notches for RBI ('bbb'). VB Verbund's VR ('bb_') is considerably weaker, reflecting its weaker franchise and continued challenges to reposition the bank following extraordinary support provided to OeVAG in 2012. CEE and Capital Determine Upside: Given the still difficult operating environment across much of Central and Eastern Europe (CEE) and subdued credit demand in Austria, upside potential for the banks' VRs is currently limited. However, stronger core capital ratios, particularly at RBI, and an asset quality trend reversal in the banks' major CEE markets could lead to positive action on the banks' VRs in the medium term. Hungary, Croatia, Romania Downside: The performance in the banks' Austrian home market and many larger CEE markets, notably Poland, the Czech Republic and Russia, remains adequate despite sluggish loan growth; activities in Romania, Croatia and Hungary continue to be loss-making or underperforming. While Romania is showing some first signs of improvement, Fitch expects Hungary and Croatia to remain a drag on profitability in H213.

Cost Management Remains Focus: With core revenue under pressure, all the banks have started to contain operating expenses by streamlining their branch networks and disposing of underperforming subsidiaries (Erste in Ukraine, Bank Austria in Kazakhstan). Asset Quality Yet to Stabilise: Non-performing loan (NPL) ratios deteriorated further in H113 in most markets, as a result of sluggish or negative loan growth and continued inflows of net NPLs. Fitch expects a further, albeit more moderate, worsening of asset quality in most markets, including Austria, in H213. While loan deleveraging in CEE has to date not been significant, Fitch does not expect any meaningful loan growth in the short to medium term, which will negatively affect profitability and asset quality ratios (due to the base effect). Improving Funding Profiles: Erste, RBI and Bank Austria's funding positions have improved as a result of efforts to increase local funding in CEE but also due to slow or non-existent loan growth. VB Verbund's funding profile benefits from its primary banks' deposit base and OeVAG's non-core asset wind-down. Wholesale maturities are manageable and ECB funding balances, already moderate, are being actively reduced. 35. Intesa injects HUF 37.5 bln into Hungarian unit CIB Bank Reuters October 4, 2013 Italy's Intesa Sanpaolo has decided to inject 37.5 billion forints ($172.38 million) worth of capital into its loss-making Hungarian bank unit CIB Bank, the Hungarian bank said in a statement on Friday. Intesa already injected 36.5 billion forints into CIB in June. According to financial supervisory data, CIB posted a 127 billion forints loss last year which accounted for almost half of the total loss of Hungarian banks burdened by a surge in taxes in the past years. To read the full storyhttp://www.reuters.com/article/2013/10/04/hungary-cib-intesa-capitalincrease-idUSB3N0FU00X20131004 36. Latvian banks tied to arms dealing Erste October 3, 2013 Latvia's Financial and Capital Market Commission (FCMC) will investigate the recent news reports on the possible involvement of Latvian banks in servicing Russian and Ukrainian arms deals, and will inspect whether the banks in question have operated in accordance with anti-money laundering regulations, reports Nozare.lv. The FCMC adds that the authors of the report also point out that the mentioning of specific banks in Latvia does not mean they have been involved in illegal activities. According to them, their activities may, in fact, be completely legal. The report says that these arms deals may be deemed illegal only if they have breached international regulations. The FCMC points out that it must still be verified

whether any of the Latvian banks mentioned in the report have breached any international regulations. To read the full storyhttp://www.baltictimes.com/news/articles/33495/ 37. Polish Bank Zachodni looks to buy local rivals - CEO Reuters September 30, 2013 Bank Zachodni WBK, the Polish arm of Banco Santander, wants to continue taking an active role in the consolidation of Poland's financial sector after completing the purchase of rival Kredyt Bank, its chief executive said. "The trend is in the direction of consolidation, to boost the strength of the large banks," Bank Zachodni CEO Mateusz Morawiecki told a news conference. "We are that buying force on the Polish market." Morawiecki, who said he wants to boost Bank Zachodni's No. 3 position on the market, told a Reuters Investment Summit last week that the consolidation of the Polish lenders would cool in the coming year, although more deals would happen within the next five years. To read the full storyhttp://www.reuters.com/article/2013/09/30/bankzachodni-deals-idUSL6N0HQ17520130930 38. Polish banks should be smart in buying foreign-owned rivals: central bank Reuters September 29, 2013 Polish central bank governor Marek Belka said the country's banks should look for opportunities and attempt to buy local rivals owned by foreign lenders in a smart and intelligent way. Poland, with a banking system 70 percent controlled by foreign lenders, has seen a spate of deals in recent years as some parent institutions under pressure to boost capital sold their holdings. "It is not about taking something from somebody. But if somebody is not successful, take them over," Belka said in an interview in Gazeta Wyborcza daily, adding that he advocated banks seizing the opportunity "in a smart and intelligent way". To read the full storyhttp://www.reuters.com/article/2013/09/28/us-poland-banks-idUSBRE98R05Q20130928 39. Raiffeisen Bank Int.: Clarification on capital strengthening plans Erste October 3, 2013 Following an interview with RBI CEO Sevelda in yesterday's Financial Times, saying it would currently not be the right time for a capital increase, the company clarified its position in relation to its capital strengthening plans via pursuing the following specific measures: (1) active management of RWAs; (2) the sale and/or securitization of portfolios; and (3) improvement of internal capital generation

capacity through actions such as the recently announced cost efficiency program and potential further revenue enhancement. RBI has already made a strong effort to reduce RWAs during the 9% EBA requirement period in 2011/2012. So, the room for further improvements should be limited. Asset reduction via sale might go on in Slovenia and Hungary and might be extended to some other SEE markets like Bulgaria and Croatia; however, at least Russia could request funds to support future loan growth. There seems to be the greatest potential in internal capital generation via cost savings and revenue enhancement. However, this might take some time and is not supportive for market shares in a recovery scenario. Without a capital increase, RBI might stay in consolidation mode for some time.

SE BANKER - FROM THE DAILIES 40. Lessons From Slovenia’s Public Banking Crisis NYT October 2, 2013 The lawmakers who want U.S. states to start banks should take a moment to read up on Slovenia. It may seem odd to look for applicable lessons in a small European country of 2 million people with a communist past. But the major difficulties facing Slovenian banks originate from standard governance problems, the kind of problems that could emerge in the U.S. as well. In theory, public or private ownership should not matter in terms of governance. The public shareholder would restrict its role to providing clear medium-term objectives to the management without interfering in the daily conduct of business, while guaranteeing a level playing field with potential competitors to avoid market distortions. In practice, though, public shareholders tend to be subject to political pressure. To read the full storyhttp://www.nytimes.com/roomfordebate/2013/10/01/should-states-operate-public-banks/lessons-from-slovenias-public-banking-crisis. 41. No bold move from Romania NBR ING October 1, 2013 Just a 25bp cut to 4.25% and some mixed signals. In line with the market consensus and our call, the NBR delivered a 25bp cut to 4.25% (the cumulated cuts now total 100bp). However, we incorrectly expected the cut would be matched with a slight easing of reserve requirements, as we were looking for another bold move after the surprising 50bp cut delivered previously (5 August). The main takeaway of this meeting is that the easing cycle is to continue. The NBR Board calls the easing cycle “on going” in the press release and the governor painted the relatively faster drop in deposit rates vs the ones of loans as an important issue, but one that will not deter the Bank from further easing. This is favourable as we believe another 50bp of cuts are in the pipeline (we expect 25bp cuts in the November and January meetings). The relative dynamics of rates for loans/deposits was also cited as the main reason why the Bank did not cut by 50bp at yesterday’s meeting. We are fairly puzzled

about this argument, failing to grasp the general concept that a producer can influence the margins charged by its distributors through small adjustments of the price level of its manufactured goods. The unusually short question & answer session (about 7 minutes vs around a 30 minute average in the previous meetings of this year) focused on the relative dynamics of rates, but we fail to see why this aspect is grabbing the limelight. The only aggregated data that comes from the NBR and is available with quite a lag. The latest data covers July and, like the June figures, lending rates are on a firming trend. Interestingly, the increases are smaller than the one of the main money market benchmark, ROBOR 3M, (possibly influenced by hints from the Fed), which suggests that banks’ margins are shrinking. This is true for corporate loans but also mortgage and consumer loans. A look at deposit rates yields a similar conclusion. The RON money market has been under pressure during the summer due to tapering concerns but these have more than reversed in August and September. Assuming banks kept a fairly steady interest rate margin during the past couple of months, NBR data will soon show an impressive drop in lending rates – like the key rate and ROBOR 3M, lending rates have probably set (nominal) record lows. This should be quite clear soon. Today sees the release of the August rates and by the next meeting (5 November) the NBR should also see the record lows likely reached last month. Following this logic we should be concerned that the easing cycle may be nearing its end faster than we forecast, but for the moment we believe much of such potential concerns stemming from mixed signals may be the product of odd communication (similar to May, when the NBR effectively tightened policy by hiking the important deposit rate while announcing it will soon start an easing cycle). Awaiting more information we still expect another 50bp of cumulated cuts and a return to the previous view that the NBR may opt to operate an easing of reserve requirements towards the end of its rate cutting cycle given that the former is more difficult to reverse than a rate cut and given the apparent strong preference of the Bank for gradual adjustments.

EA BANKER - FROM THE DAILIES 42. ADB backs development of non-cash payments in Azerbaijan Azernews September 30, 2013 The Asian Development Bank (ADB) intends to support the development of non-cash payments in Azerbaijan, ADB Executive Director Anthony Baker said during his visit to Azerbaijan. "ADB's strategy of development in Azerbaijan for 2014-2018 years, which was agreed with the government, envisages conducting various stimulating measures for the expansion of Azerbaijani banks' possibilities to access the consumer market through microfinance. This will give stimulus to the development of non-cash payments," Baker said, the Taxes Ministry's official paper reported. Read more here: http://www.azernews.az/business/60066.html 43. Pasha Bank joins Azerbaijan Microfinance Association Trend News Agency October 2, 2013

Pasha Bank has joined the Azerbaijan Microfinance Association (AMFA), AMFA executive director Jala Hajiyeva told Trend today. Pasha Bank has become AMFA's tenth member bank. Moreover, the Microfinance Association consists of 18 non-bank credit organisations out of 27 registered. "Pasha Bank's interest in the microfinance market differs from other banks operating in this segment," she said. "If the banks are mainly interested in access to finance, Pasha Bank's mission is connected with the intention of developing this sector." Read more here: http://en.trend.az/capital/business/2196664.html 44. Mortgage lending in Azerbaijan collapsed by 2.2% in September Fineko/abc.az October 3, 2013 The mortgage crisis which started in Azerbaijan last year did not cease in 2013. The Azerbaijan Mortgage Fund (AMF) under the Central Bank has reported that mortgage lending, which grew 2.17-fold in April (against the March’s level) up to a new absolute record for month, collapsed 2.2-fold in September against August level when its decline made 2.8 against July. Read more here: http://abc.az/eng/news/main/76478.html 45. Azerbaijani bank's average capital exceeds by 43% the capital demand effective from 2014 Fineko/ABC.AZ October 1, 2013 The banking sector has already “coped” with the new standard requirement of the Central Bank of Azerbaijan to be of effect for existing banks from 1 January 2014. The average capital of the Azerbaijani bank already exceeds the new capital requirement by 43.1%. The CBA informs that as of 1 September the overall capital of the country’ banks reached AZN 3.076 bn (absolute record) against AZN 3.009 bn by 1 August and AZN 2.57 bn by 1 January 2013. Read more here: http://abc.az/eng/news/main/76436.html 46. Azerbaijani banking sector's development rates need to be controlled Trend News Agency October 1, 2013 The rate of development of the banking sector in Azerbaijan should be controlled, Executive Director of Unibank JSC Jalal Gasimov told Trend. "At first glance, the banks are interested in reducing regulation - but this view is focused on a very short term perspective. If the market is not regulated, then it will go out of control. Banking in all countries of the world is regulated, and consumer loans are one of the constituent parts of it," Gasimov said.

According to him, on one hand, the lack of regulation can cause even more growth in lending. Read more here: http://en.trend.az/capital/business/2195971.html 47. Catastrophic insurance pool to be established in Azerbaijan until late 2013 Trend News Agency October 3, 2013 An insurance pool to cover catastrophic risks may be established in Azerbaijan by late 2013, chairman of the Azerbaijan Insurers Association (AIA) Orkhan Bayramov told Trend on Thursday. "We are currently preparing all legal procedures associated with the creation of a catastrophic pool. Its scheduled to be completed by the end of this year. In case there are delays or other problems, the project development will be completed in the first half of 2014," Bayramov said. Read more here: http://en.trend.az/capital/business/2197199.html 48. KKB temporarily stops mortgage lending Visor Capital October 3, 2013 Impact: NEGATIVE Facts/News. Kazkommertsbank announced that it temporarily stopped mortgage issuance. According to the Bank, it is related to the fact that KKB is reconsidering interest rates and most probably will increase them. We note that previously interest rates in KKB were starting from 12.5%. Analysis. Although increase in mortgage rates itself will not substantially change the Bank’s financial performance (mortgages represent 6% of total loans at 1H2013 and has been decreasing recently), we believe that this announcement could potentially be considered as a signal of liquidity constraints by some investors. We note that at 1H2013 KKB’s liquid assets represented 18% of total assets. During out latest meeting with KKB, management mentioned that the Bank will concentrate on short-term consumer lending, while the share of mortgage lending will decrease going forward. This is explained by relatively short maturity of funding. Conclusion. We expect negative bond and share price impact from the announcement. Nurlan Ashinov Dinara Yemilbayeva 49. National Bank of Kazakhstan and China Banking Regulatory Commission ink a memo of understanding KAZINFORM October 1, 2013

In Beijing there has taken place a ceremonial signing of the Memorandum of Understanding between the National Bank of Kazakhstan and the China Banking Regulatory Commission. During the signing of the memorandum the head of the National Bank of Kazakhstan Grigory Marchenko and Chairman of the Board of China Banking Regulatory Shang Fulin discussed the development of the banking sector in both countries to further strengthen and expand cooperation in the field of banking regulation. Read more here: http://www.inform.kz/eng/article/2593457 50. Sberbank opens International Desk in Kazakhstan Sberbank CIB October 3, 2013 October 3, 2013 3 October 2013, Astana – Sberbank, Russia’s largest bank, has opened an International Desk in the Republic of Kazakhstan.This branch will be focused on foreign customers working in Kazakhstanand will also serve Turkish customers. The International Desk’s branches are located in Astana and Almaty, The current portfolio of customers with international assets is $300m. Trade turnover between Kazakhstan and Turkey in 2012 amounted to $4.9bn. In 2007 it was 1.9bn dollars. According to the Statistics Agency of the Republic of Kazakhstan, there are 1,410 companies in Kazakhstan which operate within the Turkish capital, with more than 45,000 employees. At the same time, the number of Kazakh companies operating in Turkey has reached 150. Sergey Gorkov, Deputy Chairman of the Board of Sberbank commented: “The Turkish desk in Kazakhstan is the first time that the synergy effect of the international businesses of Sberbank has been seen. We intend to continue the establishment of international desks at our subsidiary banks, as we see a number of opportunities, among them - to provide comprehensive solutions and services to the multinational companies, the development of cross-border business and the provision of consultancy services to introduce companies to markets in other countries”. The opening ceremony of the new desk was held as part of the Kazakh-Turkish Business Forum, ‘Astana-Istanbul – Expanding the Cooperation’ organized by Sberbank Group, which includes, in particular, subsidiary banks in Kazakhstan (JSC "Sberbank") and in Turkey (DenizBank). 51. Kazakhstan replaces central bank governor Clare Nuttall in Astana October 2, 2013 Grigory Marchenko has suddenly been replaced by former deputy prime minister Kairat Kelimbetov as governor of the National Bank of Kazakhstan (NBK). The unexplained move, announced on October 1, comes four years into the second term of the respected Marchenko, and just ahead of the central bank's takeover of the country's pension assets.

A statement from the presidential press office said Marchenko has been relieved of his post at the bank for "family reasons". No further explanations were offered for the dismissal of Marchenko, who returned to the post for a second time in 2009 during the depths of the recent financial crisis. "He has worked in this capacity for many years, including through the difficult years," President Nursultan Nazarbayev said in a statement published on the Akorda.kz website. "He has made a great contribution to the development of the financial system of our country, to the work of the National Bank and management of the National Fund, for which I am grateful to him." Read more here: http://www.bne.eu/storyf5397/Kazakhstan_replaces_central_bank_governor 52. First Microcredit gets EBRD loan in Kyrgyz som equivalent to US$ 1.5m EBRD press release October 1, 2013 EBRD helps increase availability of credit for MSMEs in the Kyrgyz Republic, especially in rural areas The European Bank for Reconstruction and Development (EBRD) is supporting small businesses in the Kyrgyz Republic by providing funding to The First MicroCredit Company (FMCC) for the benefit of its MSME customers, especially in rural areas. A loan in Kyrgyz som equivalent to US$ 1.5 million will be on-lent to micro, small and medium-sized enterprises with a focus on Osh and Naryn Oblasts. This local currency loan will help FMCC’s customers, who receive most of their revenues in som to avoid foreign exchange risk. FMCC is a well-established MFI, wholly owned by the Aga Khan Agency for Microfinance, a part of the Aga Khan Development Network (AKDN). FMCC has a strong presence in the Southern Osh and Naryn regions, which account for a third of the total population of the Kyrgyz Republic. “First Microcredit Company is a new partner MFI for us in the Kyrgyz Republic. Together, we hope to reach out to Kyrgyz entrepreneurs, especially in the South of the country, and by offering local currency loans to help them develop and grow their businesses in these difficult financial times”, said Larisa Manastirli, Head of EBRD office in Bishkek. “We well appreciate EBRD’s support in providing us local currency funding, which is strongly needed in the local market,” said Chris Hering, the General Director of FMCC. “We will use the loan to increase funding to MSMEs, especially in agriculture, in line with our mission of supporting our small business clients and poverty alleviation. Since the beginning of its operations in the Kyrgyz Republic, EBRD has invested over €432 million in the country, in over 100 projects. 53. Profit of banking sector in Kyrgyzstan reaches $33 mln YTD Central Asian News Service

October 2, 2013 Profit of the banking sector amounted to 1.6 billion soms (around $32.887 million at the exchange rate of the National Bank) since start of 2013, National Bank's External Supervision Division Chief Seitek Chalbayev said at the round table discussion on September 30. Read more here: http://en.ca-news.org/news:528852/ 54. Mongolia: Collapse of Savings Bank leads to calls for better regulation South China Morning Post September 30, 2013 It came like an unseasonal Siberian wind from the steppe. Anointed the "Best Managed Bank in Mongolia" by The Asian Banker magazine in April this year, the collapse of Savings Bank, the country's fifth-largest lender, only three months later, has led to calls for further regulation and oversight as the country upgrades its financial services. Branded with a negative outlook by ratings agency Moody's, the banking sector faces challenges, "in managing what will likely be a period of rapid loan growth in an economy that is increasingly exposed to commodity-driven boom-bust cycles", said Graeme Knowd, Moody's associate managing director of financial instruments group at a recent investment forum in the Mongolian capital of Ulan Bator. Read more here: http://www.scmp.com/business/banking-finance/article/1318625/collapse-savings-bank-leads-calls-better-regulation 55. Tajikistan’s overheated banking system evokes concern, say EDB researchers ASIA-Plus Information Agency October 2, 2013 The aggregate GDP of the CIS countries in second quarter of 2013 grew by 1.4%, which is significantly lower than in the past year (4.0%) and the preceding quarter (1.7%), the new issue of The CIS Macromonitor released by Eurasian Development Bank‚Äôs (EDB) Research Department on October 1 said. Read more here: http://news.tj/en/news/tajikistan-s-overheated-banking-system-evokes-concern-say-edb-researchers 56. Uzbek bank plans to attract China Development Bank's credit line worth $100 million Trend News Agency October 2, 2013 National Bank for Foreign Economic Activity of Uzbekistan (NBU) plans to attract a credit line of China Development Bank (CDB) in the amount of $100 million to finance investment projects in the sphere of small business and private entrepreneurship, a source in the Uzbek bank's management told Trend on Wednesday.

According to agency's interlocutor, a memorandum was signed between the banks during Chinese President Xi Jinping's visit to the country in September 2013. Read more here: http://en.trend.az/capital/business/2196950.html