Gazeta: "The Prime Minister Proposes Raising Money Inside the Country"
The government is poised to change the basis of the financial system.
Russian authorities believe the process for developing the country's financial system must be changed, Prime Minister Vladimir Putin told a forum organized by VTB Capital yesterday.
He said the government expected corporate reserve funds to be used more actively, and that the insurance system, including pension funds, would be developed.
To develop the new approach, the government will provide additional stimuli to encourage Russian bank expansion. However, he did not elaborate.
The government would soon take measures to improve the work of the banking sector and the stock market. "It is not our aim to create a financial system from Central Bank reserves or the government's reserves; our aim is to create an internal source of growth from savings funds that investors could use," Vladimir Putin said. "The basis for such a market must be the savings of households and enterprises."
To this end, more flexible and better protected tools for investing savings, including pension savings, are to be introduced shortly. In addition, the government intends to use infrastructure bonds. All this, the Prime Minister said, would enable the Russian economy to have the advantages of its own long-term resources.
Vladimir Putin also revealed some other government plans, apparently aimed at strengthening the banking system. Measures are being prepared to stimulate the expansion of banks. The Prime Minister did not specify how exactly the government would promote bank mergers, but he stressed that "we should proceed very carefully, without violating the owners' rights."
"Essentially, the Government would adhere to the same strategy as today. It would offer support only to major banks thus giving them a competitive edge, says Alexander Osin, chief economist with the Finam investment company. "For example, the government may grant subsidies to the real sector through state-owned banks or issue loan guarantees only with major banks. As a result small banks will be squeezed out of the market."
"In addition, the government could increase banking capital requirements and demand greater transparency of their assets. As a result, small banks which have piled up bad debt may either try to meet the requirements and expand, or sell their assets or merge with other banks," adds Valery Petrov, member of the Board of the Investment and Financial Analysts Guild.
Meanwhile, the First Deputy Chairman of the Central Bank, Alexei Ulyukayev, yesterday described the current state of the banking system. He said that the stability of the banking sector was not under threat. The level of capital sufficiency at present is about 19%. "In our targets we expected it to be not less than 11%," Alexei Ulyukayev said.
He also said that the ratio between bank loans and deposit rates has improved. "We are telling the banks that high interest rates are counterproductive," he said.
Even so, the Bank of Russia would like to be able to compensate banks for possible losses in the interbank credit market and to regulate deposit interest rates. Alexei Ulyukayev said he did not see any special risk of crisis arising, but still the Central Bank had to warn banks against pursuing reckless policies. So far, however, the Central Bank has not availed itself of its right to limit interest rates preferring instead exhortation to action.
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Refinancing rate bounces back to the pre-crisis level.
As of today the Central Bank cuts the refinancing rate by 0.5 percentage point to 10% on an annualized basis, thus bringing the rate to its all-time low in the period between June 2007 and February 2008. The reason for the seventh cut of the refinancing rate is that the Central Bank is confident that inflation in Russia is on the wane.
Yevgeny Mazin, Yelena Melnikova
