Moscow Tries to Reinvent Itself as Financial Hub

James Hill for The New York Times

Moscow is betting on new skyscrapers to attract foreign banks and help it overcome a reputation as a difficult place to do business.

MOSCOW â€" Having tried and failed to become a major financial center, Moscow is trying yet again â€" only this time it finds itself competing for business with Warsaw, not London, Tokyo and New York.

Moscow wants companies to list on the Moscow stock exchange. It wants money center banks to expand here, as well as insurance companies and law firms that deal with securities, to make Moscow the hub for the former Soviet Union or Eastern Europe.

To do all that, city leaders are inviting business to glittering new skyscrapers, including the Mercury City Tower, which at 75 stories is the tallest building in Europe.

“The idea is to upgrade the position of Moscow in ratings, to become closer to the leaders of innovation and to the big boys of international financial centers,” Andrei V. Sharonov, the deputy mayor for economic affairs, who led a roadshow tour promoting the city in Asia, said in an interview.

This spring, the city government sent deputy mayors to Tokyo, Singapore, Frankfurt, London, Boston and New York to tell banks and other financial companies they should take a closer look at Moscow. The trip was the first concerted effort by the city government to woo investors as tenants for the new high-rise financial district called Moscow City.

Certainly Moscow has a lot of wooing to do. A city of traffic-clogged highways and sprawling concrete apartment blocks, Moscow is widely known as a singularly difficult place to do business. It did attract the big banking houses from New York and London after the fall of Communism. But cronyism, the lack of transparency and shady accounting gave companies pause. Weak courts and selective enforcement encouraged companies to conduct business outside Russia.

Political change in Russia further sapped enthusiasm. Vladimir V. Putin, a skeptic regarding greater integration with the West, succeeded Dmitri A. Medvedev, who was seen as a modernizing figure, as president in a switch known as “the castling” for its resemblance to the chess move.

Mr. Medvedev had named senior Western bank executives to an advisory council for transforming Moscow’s financial sector. They included Jamie Dimon, the chief executive of JPMorgan Chase; Vikram S. Pandit, the former chief executive of Citigroup; and Lloyd C. Blankfein, the chief executive of Goldman Sachs.

But the Global Financial Center Index, published in March by Z/Yen, a consulting agency, placed Moscow 65th out of 79 cities studied. London was first, followed by New York and Hong Kong. The ranking placed Moscow between Bahrain and Mumbai. A survey by the World Bank and the International Finance Corporation even ranked Moscow No. 30 out of 30 Russian cities for ease of doing business.

“Moscow was never going to be an international financial center,” a Western banker working here, who was not authorized to speak for his employer on the matter, said of the effort. “That was a joke.”

So Moscow is setting its sights a little lower. Its biggest problem is to be taken seriously even as a regional center.

The midsize companies in neighboring Ukraine or other former Soviet republics are choosing to go public in Warsaw. They are hardly bothering to look at the carefully laid out welcome mat in Russia. Kernel, a Ukrainian corporate farming enterprise, and Coal Energy, a Ukrainian producer of steam coal, listed in Poland, where a policy of investing pensions in the stock market helps the local exchange.

The Warsaw stock exchange, in fact, has so many Ukrainian company listings it has a Ukraine index. Micex, the Russian stock exchange, has no such index because it has so few listings.

Moscow must compete, said Mr. Sharonov, the deputy mayor, because “there are a lot of other opportunities and competitors all over the world.”

Moscow’s roadshow was intended to illustrate the city’s efforts to become more livable for foreign executives and residents, Mr. Sharonov said. A new interchange links the financial district to nearby roads, for example, easing congestion.

Also, under the federal program to promote banking here, Russian financial regulators tied up loose ends in ways that pleased stock traders and other financial professionals, but have not been widely noticed.

Russia created a central securities depository, introduced standard accounting rules for publicly listed companies and is well on the way to consolidating nearly all financial regulatory authority in the central bank by 2015. And, without much fanfare, the government now insists that all listed Russian companies report financial results in accordance with international accounting standards.

“It’s a substantive change,” said Bruce Bower, the managing director of Verno Capital, a hedge fund that focuses on Russia. “The government realized that by doing a little work, for the first time, it could make a difference.”

A version of this article appeared in print on April 4, 2013, on page B3 of the New York edition with the headline: Moscow Tries to Reinvent Itself as Financial Hub.