Ben Aris in Moscow -

The crisis has hurt Russia's banks, but for the specialists things aren't as bad as you might think. James Cook is a doyen of Russia's banking industry and the founder of Aurora, a private equity fund with a big exposure to the sector.

With investments into DIY, a financial supermarket called Kreditmart and a stake in Unistream Bank, Cooks says that the crisis for him hasn't so much depressed business, as moved it about. "True that the consumers are borrowing less, but they are still spending money. It is just they are being more care about what they are spending it on," says Cook, sitting at a table in the Tibetan restaurant at the foot of his office building. "For example, Superstore (DIY), one of our assets, just had one of its best months ever in August this year."

Mortgages are another important line for Aurora and Cook says that while many banks have cut their mortgage programmes in the last year, some 10 are still in the business. The difference is that they have become lot more conservative and demand higher up-front contributions from prospective borrowers. "There were no mortgage deals at all in the first quarter of this year, but in the second quarter things started to pick up. However, on September 1, we suddenly had a flood of applications for consumer loans and mortgages," says Cook. "The market is open again, but it will take about a year to get back to the pre-crisis levels of lending."

Still, oddly enough the cost of mortgage money has remained largely unaffected: prior to the crisis, the average rate on a mortgage was about 13%, and by the start of the autumn, the rate had risen to about 14% in dollars and 15-20% in rubles. "But this is the same rates as we had 10 years ago," notes Cook.

One of the more dramatic changes to mortgage lending is banks will now only lend to people who can prove their income (for example with tax returns). Many Russians moonlight or work in the grey economy and during the boom years, borrowers only had to prove they had an income; however, now banks are more concerned about their ability to recover bad loans, so they are demanding to see legitimate income before extending loans.

Even so, mortgages have also received a boost from the crisis. In the boom years, everyone was borrowing, so with volumes constantly rising the game was all about grabbing a piece of a growing pie. "Now that growth is going to be slower and a punter's credit quality is more important, some banks are hoping to capture clients with a mortgage," says Cook. "They hope to use their relationship to cross-sell their other products using the mortgage, which is the ultimate guarantee for all the borrowing."