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State Moves to Save Banks
The Russian Finance Ministry and Central Bank have taken emergency measures on the behalf of the country’s banks. They are promising to make 1.5 trillion rubles available to Sberbank, VTB and Gazprombank for three months on the condition that they support other banks. The first bank to receive support was KIT Finance, which was tottering on the brink of bankruptcy. The need remains great, however.
Commercial banks received the 150 billion rubles in deposits yesterday that they had borrowed at a Finance Ministry the day before. But that did not ease the shortage of money in the banking system. In two direct REPO auctions, another 362.5 billion rubles was taken, which is 5 billion over the record set Tuesday. Yesterday, the Finance Ministry provided banks with 118.679 billion rubles in an auction to place in temporarily free treasury funds in week-long deposits between September 18 and 25.
The managerial REPO market, on which banks credit each other using securities as collateral, was paralyzed yesterday because of the banking crisis and the close of trading on the MICEX, where those deals are made. Deals worth several million rubles were made before the market was closed down at noon. Interest rates have risen to 17-20 percent and discount rates to 25-30 percent, from 2-5 percent. There were reports that VTB and Gazprombank would no longer service other banks on that market. VTB denied those rumors. Gazprombank declined to comment.
The crisis took a turn for the worse when KIT Finance was unable to more than 10 billion rubles in obligations at the beginning of the week. Gazprombank also stopped crediting clients using securities as collateral on Monday. Yesterday, after the closure of the REPO market, only large banks were left on the interbank crediting. “Liquidity was distributed within a very narrow circle,” a banker commented.
www.kommersant.com
All the Article in Russian as of Sep. 18, 2008
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