Finance Bank customers line up at the bank entrance, March 11, 2006.
Photo: Dmitry Lebedev
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Central Bank Reduces Systemic Risks
Standard & Poor’s rating agency announced yesterday that it has lowered Russia’s banking industry country risk by one level, from group 8 to group 7, in reaction to the Central Bank’s support for the banking system during the financial crisis in mid-2007. “What the Bank of Russia undertook last autumn significantly raised our base expectations,” explained Ekaterina Trofimova of the S&P Paris office. That places Russia in the company of Turkey, Latvia, Romania and El Salvador. It had previously been grouped with Argentina and Kazakhstan. The agency also affirmed Ukraine’s place in group 10, the weakest group, yesterday.
One of the first measures the Bank undertook to support liquidity in the banking sector last autumn was to was to lower the banking contribution to the obligatory reserve fund for three months from 4.5 to 3.5 percent on foreign borrowing and from 4 to 3 percent on ruble and retail deposits. It also changes the list of refinancing instruments and began providing banks with direct credit (which was used by URSA and VTB, in particular).
The agency is still convinced, however, that the Russian banking is characterized by a weak institutional system and aggressive growth of crediting financed increasingly by foreign borrowing. In the event of a recession, the agency maintains, 35-50 percent of Russian banks’ assets may prove to be problematic. That estimate is down from the level of 50-75 percent calculated by S&P before June 2007.
www.kommersant.com
All the Article in Russian as of Aug. 07, 2008
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