Izvestia: “BANKS SLAPPED ON WRISTS … AND GIVEN MORE MONEY”
When will government assistance to banks reach the real sector at acceptable rates? When will they curb the appetites of top managers who enjoy government support and pay themselves hundreds of millions in bonuses? Prime Minister Vladimir Putin made his views perfectly clear at yesterday's meeting devoted to support of the banking system.
First, from now on government support will be linked with the crediting of the real sector of the economy. The banks that receive government support will have to issue a matching amount of loans to enterprises. Second, the top managers of companies to whom a lifeline has been thrown will publicly report on their salaries and bonuses. Most importantly, the Government has decided to partially nationalise banks.
Amid talk of a "second wave" of the crisis because of loan defaults, the Prime Minister reassured the banking system that it would not be left in the lurch. He recalled that 500 billion roubles of budget money has been earmarked to support banks this year. He said more would be available if necessary. However, those who use government assistance will have to meet tough requirements.
"The banks which have received government assistance will have to provide loans to the real sector and individuals to at least the same amount as the government assistance and at a rate not higher than the refinancing rate plus 3 percentage points," Vladimir Putin said yesterday.
In other words, such loans should cost 16%. The Prime Minister stressed that this should be the end rate for the borrower. That is a change on the previous practice when the Government lent money to bankers at 8% while banks issued loans at 25-30% interest. The organisations that receive government assistance should disclose the amounts of loans they have issued and the salaries and bonuses of their top managers.
However, there were at least two good pieces of news for the banks yesterday. First, the procedure of co-financing during the issue of subordinated loans will change. While previously shareholders had to match every government rouble with their own, now the ratio for those who have already received assistance and issued loans to the real sector will be 1:3. For the new recipients the ratio will remain unchanged.
Second, the Government has decided on the mechanism of additional capitalisation of the banks whose shareholders cannot afford co-financing because they have no wherewithal.
"The use of government bonds may be another way to increase bank capitalisation. Please finalise this issue within two weeks," Mr Putin told the Finance Ministry and the Central Bank.
This was probably the most important statement. If the mechanism is put in place the Government can become the owner of several private banks. How does the mechanism work? It is simple: The state issues securities and exchanges them for the bank's shares. This scheme is good for the state because it does not involve budget spending, and it is good for the credit organisations because it enables the banks to use government bonds as the most reliable collateral for refinancing by the Central Bank.
Talk about nationalisation is inevitable, although in a crisis private banks dream of being owned by the state. Especially because a buy-back mechanism will be envisaged, as the representatives of the Finance Ministry and the Central Bank said earlier. In other words, nationalisation will be only temporary.
Anna Kaledina
