A Russian banking crisis looming? Not too many years ago, Russian defaults just about took down the whole world system, remember the genius trust at Long Term Capital Mis-management?>
Russia's Central Bank chief tried to reassure the country on Wednesday that its banking sector was sound, and announced that the Bank was involved in a talks aimed at rescuing the first major banking casualty from the brink of collapse.
Central Bank Chairman Sergei Ignatyev said that state-owned Vneshtorgbank was in negotiations to buy the troubled Guta Bank, a day after Guta Bank suspended operations.
Guta Bank's troubles - revealed Tuesday when clients arrived to find the operations suspension notices taped to the doors of some branches - stoked fears that a liquidity crisis that has troubled the country's smaller banks is spreading to the sector's major players.
On Wednesday, Alfa Bank, one of Russia's largest banks, fended off reports of problems, saying it was extending banking hours to ensure that all customers could retrieve their money at any time, according to Russian news reports.
Ignatyev told Russia's lower house of parliament that the Central Bank board will also consider a sharp cut in the amount of money it requires banks to place on statutory reserve accounts with the Central Bank. The move would automatically free up a large amount of money.
Additionally, a law is being prepared that would allow more commercial banks to participate in a system that insures deposits of about 100,000 rubles ($3,450), the ITAR-Tass news agency quoted Ignatyev as saying. Banks that elect not to participate would lose their right to work with nonbusiness clients, he said.
"If the bill is approved, it will no longer be important where investors open accounts," he was quoted as saying.
Despite the quick measures, Ignatyev insisted, "I am convinced, as before, that the current problems are only psychological."
"There is no crisis," he said.
The banking sector's recent troubles began in May when the Central Bank revoked the license of medium-sized Sodbiznesbank because it was allegedly laundering money, including payments made in connection with a mafia-style assassination. Sodbiznesbank has denied the charges.
It was the first time the Central Bank had pulled a license before a bank had actually defaulted on a loan, and it spurred fears that a purge of the banking sector was in the cards.
Soon after, Credittrust, a bank allegedly connected to Sodbiznesbank's owners, shut down operations.
After Sodbiznesbank's license was pulled, rumors of a Central Bank blacklist circulated and the banks themselves were quick to distribute their own versions of the alleged list.
Bank-to-bank lending rates soared, and many banks closed credit lines to one another.
While some banking experts had said that the fears were little more than a tempest in a teacup and would be unlikely to spread to bigger banks, Guta's actions Tuesday seem to suggest otherwise.
The ITAR-Tass agency cited an unidentified source as saying that the liquidity dry-up at Guta Bank, which ranks in the top 20 in Russia, may have been provoked by rivals closing loans to the company and presenting bills for payment on a massive scale.
Ignatyev said the Central Bank was willing to provide credit to Vneshtorgbank to purchase Guta Bank. If the sale went ahead, Ignatyev said, it would rapidly restore Guta's ability to make payments, he said.
Guta Bank was established in 1991 and has a sprawling network of some 140 branches and offices throughout Russia. Part of a holding company that includes about 100 companies in a broad range of sectors, its shareholders include three of the biggest confectioners in Russia.
Richard Hainsworth of the Rusrating agency said that Russia, which is expecting 6.6 percent economic growth this year, has no macroeconomic problems that could provoke a banking crisis of the kind that hit the country during the financial meltdown of August 1998, when millions of Russians lost their savings as the ruble collapsed. |
