On the situation in global capital markets, told RBC partner at Ernst & Young, the team leader to work in the capital markets Marcello Gelashvili. What is the current crisis? Disparities in the capital markets were reflected in the real sector or the very recession that all feared for so long? Marcello Gelashvili: The U.S. economy has a leading position in the world, unable to cope with internal difficulties, according to some economists, is already in a recession. Former Fed Chairman Alan Greenspan believes that such crises occur once in 100 years, these shocks the world economy has not experienced a long time. Many experts compare the current situation with the Great Depression. The bankruptcy of investment bank Lehman Brothers became the largest in corporate U.S. history. The U.S. government was forced to provide financial assistance to banks Bear Stearns and insurer AIG. Stock indexes around the world demonstrate a strong decline of values. The global financial crisis has also affected Russia. Russia until the middle of the summer of 2008 almost did not feel the influence of the situation in the U.S. and Europe. What is the reason, and that eventually led to the current day situation? MG: Indeed, the financial situation in Russia, unlike the West, quite a long time remained stable. The influence of the world's problems on the Russian economy is largely delayed and mitigated by such factors as the strong macroeconomic performance, growth in commodity prices, and a balanced budget policy. But increased geopolitical risks, a significant decrease in commodity prices amid falling demand in the world and intensified in connection with this capital outflow from the country led to the strongest over the past 10 years, turmoil in financial markets. As a result, the RTS index has decreased since the beginning of the year by 70% in September-November, a decline of almost 60%. Financial institutions began to experience liquidity problems, the outbreak of the crisis of confidence between banks. CIT Finance Investment Bank, banks, Bank of Communications and GLOBEX are taken over by companies and banks with state participation, which saved them from bankruptcy. Investment Company AntantaPioglobal could hardly settle with contractors, selling part of their business and go into serious cost savings. Even banks with state participation have to go to considerable revision of budget expenditures. What generally can be caused by the crises of the financial system? MG: The number of reasons. For example, the irrational behavior of investors during periods of financial instability, lack of information, the predominance of negative trends, a manifestation of "the effect of the crowd." Investors do not always make decisions based on objective fundamentals or macroeconomic data, which leads to unpredictable changes in asset prices, sharp fluctuations in prices and volumes of transactions. Such actions of investors have a destabilizing effect on the financial system as a whole, negatively affect the possibility of redeployment of capital and liquidity. Investors' behavior - is one of the reasons. What other factors could have a negative impact on the financial system? MG: Incorrect valuation of assets and inadequate sharing of risks, the use of "leverage" and may adversely affect the stability of the financial system. Financial market participants are actively using borrowed funds for operations (eg, margin transactions in securities and derivatives), increasing their profits, while increasing the risk of bankruptcy. It should also be borne in mind that the system of risk control and valuation of financial instruments behind the practice of making deals and not fully reflect the complicated structure of the transaction. Thanks to the globalization of financial markets has become possible to create very complex derivatives whose existence is not even anticipated by the organization of systems of risk control several years ago. The financial authorities and regulators through their actions or lack of interference may cause problems in the financial market. There is a perception that the problems in 2008 and linked to the lack of regulatory measures. The current crisis - not the first time in world practice. Is it possible to identify any trends in the history of crises? MG: Yes, probably. On average, the global financial crisis continues for a half - two and a half years. For example, the stock market crisis of 1929 lasted from October 24, 1929 to July 8, 1932, the financial crisis of 1970 - from January 1973 to December 1974, the stock market crisis of 1987 - from October 1987 to January 1989. However, the effects of financial crises can have an impact on the economy for quite some time. For example, the Great Depression that followed the stock market crash of 1929, lasted until the late 30-ies of the 20 century. But at the same time the market crash in 1987 did not have a strong influence on the economy due to the skillful actions of financial market regulators. What is the difference between the current crisis from the previous ones? MG: This is the first truly global financial crisis that has affected virtually every country in the world. Governments of the leading countries in the world are forced to take joint actions and coordinate their efforts in combating the negative manifestations of the crisis. It is hoped that joint efforts can mitigate the effects of the crisis and its further impact on the global economy. What positive things can be learned from this situation? MG: The crisis revealed weaknesses in the business organization, as well as the strongest impact on the inefficient companies. Companies that survived the crisis may become very attractive to investors. However, it is important that in a crisis, companies were transparent and did not stop to disclose financial statements. Performance of organizations in difficult circumstances will be interested potential investors, as will evaluate the quality of management and efficiency of the company as a whole. What is the outlook on the future of the world financial system? MG: Accurate predictions are hardly possible. However, the situation over time should begin to improve. Modern business can not survive for long in terms of financial famine, so the company, withstand the first blow of the crisis will start to look for opportunities to raise additional capital. Historically, as a result of the restoration of the financial system after the crisis, the number of IPOs increases. At the global level, certainly in the near future there will be major changes. The role of developing countries into the global financial system may increase. In addition, the system of risk control, most likely, will be subject to revision. It is possible that regulators will be forced to tighten the requirements for market participants. What, in your opinion, expects the Russian market in the future? MG: With regard to the future of the financial market in Russia, the current situation differs considerably from what it was in 1998. The roots of this crisis are abroad, but because Russia has already thoroughly integrated into the global financial system, its economy and financial sector could not remain aloof from the crisis. Many experts believe that the peak of the crisis will be in February-March 2009, when its negative impact on the economy will be enhanced by a seasonal decline in economic activity. After that, perhaps, will begin the phase of recovery. How long it will last, largely depends on the competent and timely action by the government and financial market regulators. It is possible that even in the initial phase of recovery of the financial system will be a number of companies that attempt to resume IPO, postponed due to the crisis. How do you see the investment climate in Russia in the near future? MG: Despite a slowdown in economic growth, Russia will remain the largest consumer market in Europe, which will continue to attract foreign investors. Once the negative trends in the global financial system will begin to wane, the risks of investment in developing economies decline, investment in financial and real sector of the Russian economy will continue to grow.
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