MDM Chairman Says Banks Need State Support of $33Bln

MTMDM chairman Oleg Vyugin talking at the Russia Forum 2009 on Thursday.
MDM-Bank chairman Oleg Vyugin said Thursday that the Russian banking system might need state support of up to 1.2 trillion rubles ($33 billion) this year but that there's no reason for the government to take stakes in private banks of more than 25 percent.

Speaking on the sidelines of an investment forum, Vyugin said he had calculated that the state could spend about 800 billion rubles to support capital levels at state-run banks and around 300 billion rubles for private banks.

He spoke before the Cabinet decided to inject another 500 billion rubles into the banking system.

"The Russian banking system might need up to 1.2 trillion rubles to write down possible increases of nonperforming loans in the worst scenario," Vyugin said.

Despite a major state bailout of the banking sector, Vyugin said he saw no reason for the government to take more than 25 percent in private banks.

Several midsized banks, including Globex and KIT Finance, have been bought by state-run companies for nominal prices since the Russian stock market crashed in September.

Vyugin also said his MDM-Bank used to earn up to $1 million a week for its clients on foreign exchange transactions and cash banknotes delivery.

The Central Bank has spent more than one-third of its foreign currency reserves, largely to help support a managed devaluation of the ruble. The managed currency is now trading near the lower end of its trading corridor.

"The market players have no cash to attack the barrier," Vyugin said.

The government has warned banks not to speculate against the falling ruble, although the gradual devaluation left considerable incentive to profit on the currency's decline

Speaking at a conference on Wednesday, Sberbank chairman German Gref said the country's largest lender had not made "a kopek" on devaluation bets.