What would you do if your bank decided to send information about your debts to the media and your business partners when you were late repaying a loan? Or, if you were a bank, what would you do if a client decided that it did not want to repay a loan under an agreed schedule but would repay you in its own time?


Since the banking crisis of last August, much has been written on the subject of problems with interbank payments -- much less has been said about how it has put banks at loggerheads with their customers. The following example is a case in point.


For computer-assembly companies, flexible credit arrangements are essential since they must buy large volumes of components a long time before they are able to sell them as finished computers. Right now, however, flexible credit is not a popular word combination among Moscow's commercial banks.


This week we received a fax from the Moscow Joint Stock Innovation Bank, or MAIB, beginning with the lines: "Under instructions from the Council of Directors of the Moscow Innovation Bank, I provide you with negative information about your business partner ...." The fax goes on to explain how two large Moscow computer assembly companies, Stins Coman and Technoserv, owe $2 million and $700,000, respectively, and are refusing to pay the money back.


In response, both companies admit that they owe money and that it is overdue, but they say MAIB is trying to blackmail them. Technoserv says it is preparing to sue MAIB for violation of laws on commercial secrets. Stins Coman says it has documents even more compromising about the bank that it may publish in response.


Communication between the bank and its two clients seems to have broken down. Most significant is that neither party sees any use in recourse to the law. MAIB says a court of arbitration could rule that it is owed money -- but that this would not help it get its money back. Stins Coman and Technoserv see laws only as potential weapons for them to use in response to this broadside from their bank.


In talking to both sides in this dispute, I am in no position to judge who is right. I did, however, receive the strong impression that the commercial banks, which make the most convincing threats, are the ones to get their money back first. Technoserv says as a result of the banking crisis in August it returned $3 million to City Bank in a single installment. Angry that his debts were not honored so quickly, MAIB's chairman says neither of these two debtors would dare play games with one of the large commercial banks.


This affair highlights the difficulty Russian companies have organizing a legal onshore Russian business. If things start to get difficult, your banker can very quickly become your sworn enemy. What is to stop any bank with sufficient means for persuasion from demanding early repayment of loans or levying arbitrary "penalties" for late payment? We found out about this dispute only because the commercial bank involved has apparently not followed this golden rule of Russian banking,.


Leonid Parshikov, vice president of Stins Coman, says he would love to use a foreign bank, but since there are effectively no foreign banks able to operate in Russia, this is impossible. This is only half true.


If computer firms had only Russian commercial banks to rely on, the business would not exist, since profits from PC assembly are lower than the loan interest rates charged by banks here. Consequently, many local assembly companies rely on their suppliers to provide them with lines of credit to keep the wheels turning. Others, like the bulk of successful trading companies, simply flout the law and take their whole business offshore. Can you blame them?





Robert Farish is the editor of Computer Business Russia. Fax: 198 6207, Internet e-mail: farish@sovam.com