The government fails to find support for plans to reduce aid to the financial sector.
The Central Bank (CB) is strongly opposed to the idea of cutting support for banks in 2010 and would rather see the amount of aid remain at its current level. And the bankers agree with their regulator. In their opinion, it's much easier for them to issue credits to the economy with the state backing them.
On Thursday, First Deputy Chairman of the Central Bank Alexei Ulyukayev asserted that in 2010, the stimulus package for banks should remain at the planned level of 250 billion roubles through the issue of federal loan bonds (OFZs).
Initially, the budget earmarked 150 billion roubles for OFZs in 2009, to be used to capitalise banks, and another 250 billion for 2010. Yet, it was later decided to cut support for banks altogether and use the money to support the economy instead. The relevant amendments to 2009's budget are due to be introduced next week.
In early November, Prime Minister Vladimir Putin announced that support for banks should be cut by 60 percent in 2010. As he explained, only 100 billion roubles out of the originally planned 250 billion will be transferred directly to banks through OFZs, while the other 150 billion will be redistributed to the anti-crisis fund.
The Central Bank, however, is opposed to reducing funds. "I've never said that all this money will actually be used. I see it as an insurance mechanism and I believe that the amount should be left as it initially was," Ulyukayev said. According to Ulyukayev, the banking system is more or less stable.
The rules for the additional capitalisation of Russian banks through OFZs - which were published just the other day by the government's press service - dictate that in order to replenish its capital, a bank must have a long-term credit-worthiness rating which was awarded before July 1, 2009 by at least one leading agency, for example, B level according to Fitch and S&P, or B3 according to Moody's.
The size of the bank's assets as of July 1, 2009 must be at least 30 billion roubles and its own assets must account for at least 10%. Furthermore, a credit organisation should be exempt from the Central Bank's bans on certain banking operations and should also benefit from anti-bankruptcy measures.
According to both the CB and the Government, about 75 banks currently qualify for additional capitalisation through OFZs. Yet, the banks are not especially excited about this prospect. Alfa Bank, St Petersburg Bank and Promsvyazbank all have yet to avail themselves of the opportunity. As our correspondent learned at Promsvyazbank, the mechanism of capital replenishment through OFZs not only restricts the rights of existing shareholders, but would also put government representatives in the bank's governing bodies.
In addition, bankers have complained that the procedure for replenishing capital through OFZs is even more complicated than obtaining subordinated loans from Vnesheconombank, because registering the issue and securing approvals for the business plan and other procedures can take several months.
Analysts believe that there is a very simple reason for the mechanism's unpopularity. It's not that the banks don't need the money; it's just been offered to the wrong kinds of banks. Veronika Chekina, an expert with Infin Fund, pointed out that medium-sized banks (primarily regional banks) with limited access to budget resources would be more interested in gaining the chance to replenish their capital through OFZs.
Yet, imperfect as it may be, bankers for the most part welcome the mechanism and would like to get the option to use it. According to Nomos-Bank analyst Yelena Fedotkova, the situation in the banking sector can only be described as positive, since it is much more predictable than it was in late 2008. The banks are still in arrears and, if S&P's forecast is correct, the amount of problem loans will double by the end of 2011 compared with the end of 2009. So, the question of additional capitalisation of banks may become highly relevant as soon as the spring of 2010 comes around.
"250 billion roubles may seem like too much at the moment, but there's a risk that the banks will experience a shortage of capital next year. Undoubtedly, with government support, the banks would feel more confident in building up their assets, including over the issue of further crediting real sector enterprises," she said.
Vladimir Tikhomirov, senior economist with Uralsib, believes that the positions of Putin and Ulyukayev differ only in the attitude towards outstanding debts: the former believes they will go down, while the latter fears they will grow. "Both points of view may be justified," he said. According to the expert, there have been some signs of stabilisation recently, but it's still hard to predict what will happen in the future. As Tikhomirov sees it, a more accurate forecast of the banks' need for additional capitalisation can only be provided when the results of the fourth quarter of 2009 are announced.
Natalya Yeryomina