Logo
  Thursday, November 21, 2019
Sign-In  |  Sign-Up  |  Contact Us  |  Bookmark 

New ideas advanced by Russia's Central Bank made some experts talk about the first symptoms of an imminent banking crisis
Crisis, however, is probably too strong a term. "Urgently needed reforms" in the banking sector would probably be more accurate. The Central Bank now provides funds to other banks against federal bonds, its own securities, those of the Moscow City Government, the Federal Mortgage Agency and the Moscow Mortgage Agency. However, these instruments are not enough. "The Central Bank may also provide funding for partners against blue-chip stocks and bonds," First Deputy Central Bank Board Chairman Alexei Ulyukayev said. The Central Bank is also drafting an instruction to regulate payments against non-market assets, such as the debts of unlisted enterprises that lack credit ratings. Russian bankers, still reeling from the crisis of summer 2004, are jittery once again because market analysts have added fuel to the fire. Oksana Osipova, an economist with the Development Center, says that cash volumes increased by 129 billion rubles in April-May 2005, whereas local banks withdrew 168 billion rubles from the Central Bank because of alleged liquidity problems. Experts from the Center of Macro-Economic Studies and Short-Term Forecasts are warning that the Russian economy is suffering a shortage of cash (30% of GDP), whereas more prosperous economies boast greater volumes (100% and more). The money supply grew by just 5.1 % last May, while in May 2004 it increased by 8.4%. The government wants to bring annual inflation down to 10%, reducing the money supply for this purpose. Consequently, local banks would have less money than in mid-2004. Experts think the Central Bank has decided to take preventative measures. Pavel Medvedev, Deputy Chairman of the State Duma's Credit Agencies and Financial Markets Committee, explains the Central Bank's actions by a desire to create a more flexible and stable banking system. The Central Bank has no worries about a liquidity crisis. "Fluctuating liquidity is a normal market phenomenon," he said. "The Central Bank is supposed to regulate it with the help of stocks and bonds. As a rule, banks prefer not to hoard their money, investing in securities that can be sold, pawned or exchanged for loans anytime. The banking system's efficiency depends on the range of instruments available to the Central Bank." The State Duma is drafting amendments to some bills that will make it easier for the Central Bank to issue securities. It will be an additional instrument to regulate banking liquidity. In some cases the Central Bank must react immediately - either reduce or swell the money supply, depending on the situation. However, for the time being, it has to wait for several months before issuing these securities. The current drastic and uncompromising measures are necessitated by banking-sector reform and the sectoral-development strategy for the period up to 2008, drafted by the Central Bank and the Finance Ministry. All banks must either be reorganized or bankrupted.
Print New ideas advanced by Russia's Central Bank made some experts talk about the first symptoms of an imminent banking crisis Bookmark New ideas advanced by Russia's Central Bank made some experts talk about the first symptoms of an imminent banking crisis

Related News   
MayJune 2005Jul
MoTuWeThFrSaSu
303112345
6789101112
13141516171819
20212223242526
27282930123
45678910