Banks in the Commonwealth of Independent States generally have weaker corporate governance than peers in other regions and this is harming their credit profiles, Moody's Investors Service says in a report published today, ONA reports
According to the report of the international rating agency, regulators in the CIS have withdrawn some banks' licences because of fraud and losses caused by large related-party exposures and weak risk management. Regulators in some CIS countries have been taking steps to tighten supervision, improve reporting or reduce related-party lending.
"Fraud and financial weaknesses caused by poor governance have caused some banks to close," said Svetlana Pavlova, Assistant Vice President-Analyst at Moody's. "Key-person and related-party risks are greater in the CIS than elsewhere."
Key-person risks arise from heavy dependence on single individuals for business, which often indicates weak corporate governance and lax underwriting standards. Related-party loans on average equal about 50% of tangible common equity and 8% of total loans at CIS banks.