“Kommersant”: “The banks don’t need money”
The government is cutting the bank bailout programme by 60%.
The government is reducing the amount of money for the additional capitalisation of banks in 2010 from 250 billion roubles to 100 billion roubles, Prime Minister Vladimir Putin announced on Friday. The government accounts for the transfer of expenses to the "anti-crisis fund" by citing the improvement seen in the banking sector. In reality, the government is simply giving up on making banks give more loans to the industry through additional capitalisation and wants to have a reserve to help cut the budget deficit and repay external debts.
Putin announced the massive redistribution of budgetary spending at a meeting with the top functionaries of United Russia in Novo-Ogaryovo on Friday. "We had originally planned to allocate 250 billion roubles to support the banking sector next year," Putin said. "But starting today, the CB is cutting its refinancing rate again, which shows that the situation in the financial sphere is returning to normal. So we will apply this money towards something else."
As Putin explained, the banks will only be getting 100 billion roubles in 2010 (this is the amount of federal loan bonds with which the government will buy privileged shares in these banks), while 150 billion roubles will be used to "replenish the anti-crisis fund."
The banking system's programme for additional capitalisation in the first half of 2009 (developed as a response to the threat of bank capital deficit and curtailment of credits) envisaged the issue of about 210 billion roubles in subordinated credits to banks from the government in the form of OFZs (federal loan bonds). The banks expected to receive a comparable sum in OFZs in 2010.
By August, the problem of capital sufficiency became less severe, but this did nothing to diminish the government's intention to distribute OFZs to banks. In August 2009, the project's ideology had changed: the Finance Ministry proposed a new government resolution that would require the banks that were covered by the bail-out programme to issue loans which at least matched the level of state support in the form of OFZs in 2010. The interest rate on these loans was to be no more than 3 percentage points higher than the Central Bank's refinancing rate (which was 10.5% at the time).
In fact, the system called for the creation of an alternative mechanism to that of the Central Bank for the "long-term funding" of the banking system. Since the end of 2007, Russian banking lobbyists and the Russian Union of Industrialists and Entrepreneurs have repeatedly discussed such "funding" as an alternative way to ensure the sector's growth at the expense of the deposit base. The Central Bank, and in certain cases the Finance Ministry, has consistently rejected or limited projects involving the long-term refinancing of bank credits, shares in limited liability companies and shares of companies, the issue of "infrastructure bonds" and similar ideas.
The programme for the additional capitalisation of banks through OFZs had already begun to resemble another variant of "funding" by September. But by that time it had become clear that the scheme could not be implemented quickly (the sum earmarked by the Finance Ministry for the issue of OFZs for banks was cut to 150 billion roubles), and private banks were simply not ready to follow the "cheap credits in exchange for capital" scheme. It just didn't make much sense if it only involved state banks.
By early October 2009, the government believed that the banks would use, at best, 30 billion roubles worth of OFZs issued in 2009. The sum of the future issue of OFZs for 2010 (initially 150 billion roubles) was repeatedly hiked up. As of late October, it became quite obvious that the maximum sum of additional capitalisation for the banking system through OFZs in 2010 would be 250 billion roubles, while in 2009 nothing at all would be disbursed.
Then, on Friday, it was established that the government was no longer placing its bets on the "loans for capital" scheme: 100 billion roubles would be used by the Finance Ministry and the CB, but only to deal with emergencies in the banking sphere. This seems to be the final decision on the matter. The government has probably already formulated its amendments to the second reading of the law on the 2010 budget that reduces bank bail-out money. The 2010 budget's first reading was passed by the State Duma on October 21, and the deadline for submitting amendments to the second reading was on Friday.
The "anti-crisis fund" that the Prime Minister referred to when speaking about its replenishment does not officially exist. The creation of such "pockets" for government money requires not only the introduction of corresponding articles in the Budget Code, but also a great deal of organisational effort. Yet, under section 5, Article 24 of the draft budget law, the government has the right to spend up to 70 billion roubles in 2010 to "implement additional measures to support sectors of the Russian economy, the labour market and the social sphere." That spending was what the Prime Minister had in mind when he mentioned the "anti-crisis fund".
At the Finance Ministry, Kommersant was told that in reality, only 45 billion roubles of the 70 billion were to be used. It was reported earlier that 10 billion roubles of that sum were earmarked to finance the programme for scrapping used cars, 10 billion to support mono-cities and 10 billion to finance the projects of the President's Commission for the Modernisation and Technological Development of the Economy. The addition of 150 billion roubles to the "anti-crisis fund" quadruples the amount, bringing it up to 195 billion roubles and effectively making it a substantial reserve of the government that the State Duma has no control over.
Putin was rather vague about the fate of that money. He simply said that it would be used "to finance a wide range of programmes for economic recovery, primarily in the so-called real sector". In October, Deputy Prime Minister Alexei Kudrin indicated that the government would use the same methods it used to help banks to help key enterprises, i.e. by spreading the mechanism of additional capitalisation through OFZs to the key enterprises. And yet, today, the Finance Ministry maintains that "no concrete decisions" to that effect have yet been made. It can safely be assumed that the Finance Ministry will use the reserve of $6.7 billion as another guarantee of budget implementation if 2010's external borrowing programme fails, or to reduce budget deficit and preserve the Reserve Fund.
