New Steps Proposed for Liquidity

ReutersUlyukayev attending a business conference Wednesday on capital markets.
The Central Bank on Wednesday announced a series of measures aimed at shoring up liquidity and helping to cope with the effects of the ongoing financial crisis.

Central Bank First Deputy Chairman Alexei Ulyukayev said the turmoil in the country's financial markets had been localized but that liquidity problems created in its wake could last for another 15 months.

Speaking at a conference on capital markets, Ulyukayev said the $50 billion that the Central Bank is to make available to the state-owned Vneshekonmbank, also known as the Development Bank, to help refinance the debt of Russian banks and companies would be released by the end of next year.

He said Russian banks and companies would need to pay back up to $40 billion to foreign creditors before the end of 2008 and another $80 billion in 2009.

The Central Bank may also ease requirements on loan collateral by one percentage point to stimulate domestic banks, Ulyukayev said.

A draft bill is also being prepared that would allow the Central Bank to offer unsecured loans to rated banks for up to six months to supplement the regular banking auction organized by the Finance Ministry, he said.

As an additional measure to shore up liquidity and push down interbank credit rates, Ulyukayev said Sberbank, VTB and Gazprombank would maintain credit on the market at a minimum of 60 billion rubles ($2.3 billion).

A draft law is being prepared for the Central Bank to share credit risks with the three state-controlled banks should their counterparties default on their obligations.

Ulyukayev said the three banks would also receive partial compensation for losses incurred on the interbank market.

He said, however, that measures directed at propping up the financial market might raise inflation by one or two percentage points.

The Central Bank would also need to adjust its net 2008 capital inflow forecast, earlier set at $40 billion, because of the ongoing global financial crisis.

Ulyukayev said the Central Bank would not adjust its two-currency basket limits soon.

"The Central Bank must be neutral with regard to the exchange rate, and pricing should depend on the balance on the forex market."