Citadele Bank: we know to keep the business away from excessive politicization
Banks.eu continues a series of interviews with the top managers of European financial institutions to tell all the details of their work in Europe and plans for the future.
This time we talk to Vladimir Ivanov, the head of the department for managing private capital at the Latvian Citadele bank, who spoke about the heritage of Parex Bank, active work with the customers from the CIS and the implementation of technological innovations.
- What brought you to finances? How did you come to Citadele Bank?
- It is difficult to answer what brought me to finance, it was just fate. In 1995, some changes happened in my life, and just then I was invited to work in the financial sector, and I have been going on ever since.
If we talk about financial institutions, Citadele is the second bank in my career. I came here in 2001, when it was Parex Bank, and have been working here for 15 years without interruptions.
Initially, I came to Citadele as Deputy Head of the Missions Control Department, then I held the position of manager in a number of client departments of the main office. In general, throughout the career, my work has been associated with the front-office, and I mostly focused on international and wealthy clients.
- How many Parex Bank customers remained with Citadele?
- The simple answer to this question is a lot, because, of course, Citadele inherited from Parex Bank most of the client business, although the transition was not easy.
Of course, we can talk about a certain continuity, but Citadele Bank today is definitely an independent phenomenon in the banking business of Latvia. We are, in fact, a new credit institution, which was registered in 2010 and obtained the appropriate license, with its objectives, strategy and vision.
At the same time I would like to emphasize that really very many customer stayed, it was the vast majority. I think this fact allows us to appreciate the professionalism of both the bank's management, and all the parties involved. We were able to make the transition causing minimum damage to relations with customers, to cause customers as little discomfort as possible.
- What is the market share the bank holds in retail lending in the Latvian market?
- If we talk about what the bank's share is in the Latvian market, then, of course, on a number of key indicators Citadele ranks among the leading banks in the country, without being, however, the largest. At the end of 2015, according to the Association of Latvian Commercial Banks, on the number of clients we took the third place; on deposits is was the fifth; on term deposits we were the second; on the volume of loans it was the sixth. We can say that we are firm in our place among the top five leading Latvian banks.
- How many international clients does the bank have in the total number of customers? Or it focuses on Latvian consumers?
- Today, our activity in the Baltic region, which is home to Citadele, is in the heart of the strategy and prospects of the bank development. However, the bank serves thousands of global customers. Although their number is greatly inferior to the number of Latvian customers, international customers form a significant part of our business both in terms of deposits, and commissions received by the bank.
- What Citadele services are the most popular with international clients? With what issues do they most often come to you?
- I would say that the most demanded products are current accounts and payment cards, without which the life of a modern man is hard to imagine.
The second most popular product is investment services and capital management, including the classic asset management, as well as standard transactions with financial instruments: brokerage and custody services.
The third place is taken by services to support client activity in the framework of their international trade operations, i.e. servicing cash flows and transactions.
- And why are these services so popular?
- I think that the basis of the popularity of our products is in the first place the fact that we are a and a modern and high-tech bank with high standards of risk management, including reputational ones.
Besides offering its services to clients from the CIS countries, especially from Russia, Belarus and Ukraine, we, as a Latvian bank, use all the geographical, historical, linguistic, and, I would even say, mental benefits, which have developed over many years.
Of course, the Latvian bankers are not the only one to talk Russian. Small private banks in Western Europe also have Russian speaking staff, but it is unlikely, for example, that top management of a Belgian private bank could speak Russian with a client, and this is very important.
There is one more note to be made. Unfortunately, in recent years we have seen quite significant changes in geopolitical processes, aggravation of many contradictions, which sometimes penetrate into the daily lives of ordinary people. In this situation I would call lack of "humanitarian dislikes" one more our advantage. We remain open for cooperation with clients from Russia and other CIS countries.
In other words, we are professionals and know to distance our business from excessive politization.
- How many Russian-speaking clients do you have? Are there any services that are available to a Russian citizen, who does not live in Latvia permanently?
- Citadele has many Russian-speaking clients, also among Latvian customers. According to the Central Statistical Bureau of Latvia, a little less than 40% of the population speaks Russian at home. This proportion naturally influences the customer base of Citadele.
If we talk about international clients, Russian-speaking clients are the vast majority among them. We recognize that the CIS countries, especially Russia, are historically the target market for our business unit, where we feel most confident and where we have gained the relevant expertise to provide people with decent service.
- What services do Russian-speaking clients use most often? Is it private banking, or just opening a bank account?
- Of course, the number of customers, whose amount of assets determines their being served at the private banking divisions is quantitatively less, but the volume of our business performance with them is significant.
At the same time we have many customers who are middle class and do not ask for private-banking-level services. They are quite satisfied with the fact that we provide quality service for their basic financial needs. Obviously, the performance of each of the customer is less, but the numbers of such customers are bigger and consolidated volumes of these two businesses are comparable.
- On March 1 Citadele introduced commissions for legal entities for the account balances in certain currencies (Swiss franc, Danish krone and Swedish krona), and for cash transactions. What explains such a decision, especially with regard to cash?
- Yes, for certain categories of customers we really introduced a fee for storing sums of money exceeding a certain threshold. At the moment it applies to the three mentioned currencies, because the Central Banks in these countries have been the most aggressive in lowering key interest rates under the transition into the negative zone.
This is an expected measure and it is far from being exotic, while I note that these currencies are not the most popular among our customers, so a small number of our customers noticed it.
As for the increase of fees for cash transactions, I think it is also a natural solution. Cash turnover is an expensive process, and as alternatives to cash payments are developing, it is clear that the process of tracking paper money and fees for cash transactions will only get more expensive.
I should point out that cash transactions are also not the most popular services among our international clients, because it requires physical presence in the office, so they have nothing to worry about.
- Which currencies other than the Euro, are popular among customers?
- The second popular currency after the Euro is the US dollar, the third is the British pound sterling. However, the Euro and the dollar lead with a very large margin.
All the settlement accounts that we open to customers in Citadele Bank are multi-currency, which creates additional advantages for clients in fact: the client can choose in what currency to keep the money, and has the ability to quickly and easily within a single account carry out conversion operations.
The functionality of a multi-currency account, of course, does not cover the full list of world currencies, but there are about 20 of the most popular and sought after.
- What do you think about fintech start-ups, which have been dramatically changing the banking sector over the last few years?
- It’s good, and I'll explain why. Financial services, alternative to banks, are developing very fast, expanding their functionality. And these startups make people's lives better and easier.
However, start-ups should be developed in the framework of civilized processes, especially with regard to the regulated sectors, such as finance. Useless and unfair execution can discredit and tarnish the best idea.
However, fundamentally it is a positive movement. In my opinion, in the future, members of the financial industry will have no alternative but to cooperate with each other.
- Will Citadele invest into this sphere?
- Citadele Bank, of course, binds its strategic development with technological innovation. And there could be a variety of ways: collaboration with fintech start-ups, creation and development of active fintech elements in the bank itself, and extension of its existing business model.
The banking industry, especially private, is always built on the platform of relations between people, but today the importance of online processes is increasing every day. And banks that do not understand this, gradually begin to lose their positions.
Therefore, we pay great attention to the development of remote account management, I would say even more: remote client communication with the bank. Citadele has recently released a new version of banking applications for mobile devices, which allows customers not only conveniently and fast carry out transactions on the account, but generally stay abreast of banking information.
Here is another example of the innovative approach. Recently, Citadele has issued a payment card for the domestic market. It is integrated with a ticket for public transport in Riga. This product is very popular with the residents of the city, and I believe that its full potential is not fully realized. I hope that in the near future functionality of our payment cards will be complemented well the possibility of contactless payments.
- In 2016 Latvia introduced new requirements to study customers of financial institutions, which implies maintaining in Latvia a unified standard to exchange information. How do you think customers will react to this innovation?
- It must be admitted that our customers cautiously expect the automatic exchange of financial information, also because this procedure is new and its mechanisms is not well understood. It should be noted that the process will affect not only international clients, but also Latvians who have accounts in foreign banks.
Of course, there is some nervousness, and some changes will occur in the market, but I do not think they will be very important, because the vast majority of civilized countries enter the exchange of financial information, and this process will affect the interests of the majority of international customers in most banks in the world.
I expect new structures in the market, which will offer customers solutions "free" from the necessity to exchange financial information. However, I recommend clients to be cautious approaching the assessment of such decisions. We still need to comply with the norms, and the norm of today's financial life is the transparency of operations and cash flows.
We will assist in every possible way to help our clients understand the intricacies of the automatic exchange of financial information and assess the consequences of certain actions within it. As well as with other processes.
- What are the immediate plans of Citadele? Is there something new to be expected?
- Of course, we do not stand still, and will work actively to achieve our goals: to become the Baltic №1 bank for small and medium-sized businesses.
We see one of the main development perspectives in improving mobile banking platforms: no one should be convinced that today a person spends most of his life with a smartphone or a tablet in hands. The more financial opportunities the client has without having to use a large computer or to come to the bank branch, the more popular the bank products will become.
And I'm sure that all our customers will feel the pleasure of new solutions, both our fellow citizens in Latvia, the representatives of small and medium-sized businesses, and our international customers from the CIS.
Previous interviews in the series can be found here:
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