By Dmitry Butrin; Yelena Kiseleva; Oleg Sapozhkov
Prime Minister Vladimir Putin yesterday announced the Government's milestone decision on the bailout of the Russian banking system. The Government was discussing late into the night not only the additional capitalisation of VEB, Sberbank and VTB worth 800 billion roubles, but also the option of the state buying into the capital of private banks. The amount earmarked for the bailout is 32% of the aggregate capital of Russia's banks. According to Kommersant, the shareholders of Alfa-Bank and Gazprombank are ready to share stakes with government structures. Uralsib is also considering whether to follow suit.
At the Government meeting chaired by Vladimir Putin yesterday evening the Central Bank and the heads of major banks discussed for the first time "measures of additional capitalisation of the banking system". The idea of additional capitalisation of banks has been mooted by the CB and the Government since October 2008. In late December Deputy Prime Minister Alexei Kudrin declared publicly that the Finance Ministry was ready to allocate $40 billion for additional capitalisation. However, it was unknown until last whether the programme would cover only state-owned banks. Mr Putin, opening the meeting, removed all doubts by announcing that the issue on the agenda was granting additional capital to banks, including private lending organisations.
That marks the start of the buying of the banking system. From the latest available Central Bank data (December 2008) the assets of Russian banks now stand at about 3.7 billion roubles, and the aggregate capital as of early 2008 was 2.5 trillion roubles. If the state buys not less than 1.2 trillion roubles ($40 billion at the exchange rate in late 2008) of the banks' capital, it can claim an additional 32% of the bank capital to increase its share of the banking system to 75-80%. Considering that the share of foreign banks in the aggregate capital is about 19%, we are looking at something a little short of the buyout of the banks which have lost their capital during the financial crisis since August 2008.
The outcome of the meeting, which, in addition to the state-owned banks, was attended by Mikhail Fridman of Alfa-Bank, is unknown as the meeting lasted far into the night. The biggest recipient of money from the state treasury may be Sberbank (up to 500 billion roubles). That was the amount the bank's Governor German Gref had requested from the Government and which the Government promised to provide, according to Kommersant's source in the Government Staff.
"The state is duty-bound to support the biggest Russian bank, especially because it is the biggest creditor of the embattled GAZ," Mr Gref said. VTB initially requested 1.5 trillion roubles (more than $45 billion) from the State Treasury, but later curbed its appetite to 200 billion roubles. In early December 2008 the President of Vnesheconombank (VEB) Vladimir Dmitriyev asked the Government for an extra 950 billion roubles. Later VEB settled for 350 billion roubles, and in early February cut it down to 100 billion roubles, according to Kommersant. The state banks made no official comments. Thus the total amount of aid to the state-owned banks may be about 800 billion roubles.
The remaining 400-odd billion roubles may go to private banks, which is actually what was discussed at the White House yesterday. Among the main claimants are Gazprombank and Alfa-Bank, government sources told Kommersant. The size of their claims is still unclear. Both banks flatly declined to comment yesterday. But a top executive of one of the banks told Kommersant that several scenarios were under consideration, and one of these would have the government share in the capital of private banks rise to 25-30% after the buyout of the additional issue.
"The owners of any private bank can only dream about the state buying into their capital. They have other problems: Most of them have had to turn to VEB for refinancing Western credits to their main business, he said. If the state does not help them now, the banks will have no resources left for current operations by the end of the year."
In the opinion of Kommersant's interlocutor, only those commercial banks that belong to the category of "core banks" can count on state support in the shape of capital injections.
The Chairman of the Uralsib board of directors, Andrei Donskikh, told Kommersant that his group was also considering the possibility of seeking additional capitalisation, including offering a share in tier 1 capital to the Government. It will be recalled that the Central Bank sets caps on the ratio of the shareholder capital (tier 1 capital) and borrowed shareholder assets (tier 2 capital: in the case of Sberbank, the Central Bank has lent it 500 billion roubles in late 2008 under a subordinated credit programme). According to Mr Donskikh, the Government at present favours not the scheme of creating "bad debt banks" with the separation of banking structures, but direct buying into the capital of private banks. In the opinion of the head of Uralsib, the programme of subordinated credits could be expanded by lifting the CB caps on the ratio between tier 1 and tier 2 capital. But he sees nothing wrong with the direct sale of additional bank issues.
"The trend has been there since the end of the year. The banks are building up reserves against problem loans, which diminishes their own assets. By entering the capital, the state will compensate for the losses in the banking system," he says.
As the head of Sberbank German Gref said earlier that additional state presence in the banking system may last for "three or four years". Nevertheless it is still unclear what method of bank bailout the Government will choose. According to Kommersant's data, no consensus on a single scheme was reached at the meeting with Vladimir Putin yesterday. Perhaps partial nationalisation of every bank will be handled on a case-by-case basis.