Denver company to be first in U.S. with stake in Soviet bank.

Denver Company to Be First in U.S. with Stake in Soviet Bank

A Denver-based consulting firm will soon become the first U.S. company to acquire a stake in a Soviet bank.

MIA Financial International, a banking advisory unit of MIA International Corp., said it would take a minority stake in Lenagroprombank, a 12-branch bank in Leningrad under an agreement just signed.

The deal underscores the Soviet government's eagerness to introduce a Western-style banking system.

Assistance for Bank

The agreement also calls for MIA Financial to help the Russian bank find other Western shareholders and to modernize its operations.

Conrad Kern, president of MIA Financial, said the company was already talking to several interested investors and discussing similar agreements with another bank in Leningrad and two banks in Moscow.

He added that more Western investors were likely to soon start taking stakes in Soviet banks.

Capital Called Strong

"Many of these [Soviet] banks are well capitalized," Mr. Kern said. "You're going to see a lot more of this." The assets of the Leningrad bank were not made public.

Mr. Kern declined to disclose the names of the other three banks or the value of the contract, but said MIA Financial would be paid in Soviet rubles.

Part of the payment in rubles will be used by MIA to acquire its stake in Lenagroprombank. The rest will be either converted by MIA into U.S. dollars or used to finance other projects in the Soviet Union.

Helping with the Basics

As part of the agreement, MIA Financial is advising the Soviet bank on setting up checking and savings accounts, lending and credit card operations, and international banking services.

The company will also help choose and install a computer system best suited to the bank's needs.

Lenagroprombank, a 130-year old bank now being privatized, plans to serve large government cooperatives and private companies in and around Leningrad.

European Banks Also Advising

In June, the Russian republic commissioned Visa International, Andersen Consulting, and two Norwegian technology companies to help set up a card-based payment system.

Several European banks are also either advising Soviet banks or have set up joint venture banks with the Soviet partners.

Soviet officials also said in June that they were talking to International Business Machines Corp., Hewlett-Packard Co., and other U.S. computer companies about installing banking and payments technology.

Mr. Kern, a past president of the Colorado Bankers Association and former president of Denver-based Omni Bank Corp., said the lack of telephone lines and other infrastructure problems was making it difficult for the Soviets to modernize their banking system.

Problem with Hardware

"Even the computer systems are 20 to 30 years behind those in the West," Mr. Kern said.

The agreement is only one of several the consulting firm has signed with Soviet institutions.

In March, MIA International reached a preliminary agreement with the International Center of Development of Small Enterprises, the Moscow-based equivalent of the Small Business Administration, to help establish international commercial banks throughout the Soviet Union.

Separately, Bulgaria's central bank said Friday that it had approved the country's first joint-venture bank with U.S. partners. [Tabular Data omitted.]

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER