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. Last Updated: 07/27/2016

Alfa-Bank Rules Out T-Bills Swap

Alfa-Bank, one of Russia's biggest banks, will not participate in the government's program to swap GKO treasury bills for Eurobonds, bank officials said Wednesday.

"We are not foreign investors, who bear the risk of ruble devaluation," Alfa-Bank Chairman Mikhail Fridman said at a news conference.

"Since the bank's liabilities are in rubles, we shall redeem our obligations to depositors even in case of a devaluation."

Alfa-Bank, which is a primary dealer on the domestic bond market, has around $150 million invested in government securities.

The government has offered banks the opportunity to exchange their T-bills maturing before July 1, 1999, for seven- and 20-year Eurobonds.

Alfa-Bank's First Deputy Chairman Andrei Kosogov said that if Alfa-Bank had swapped all T-bills into bonds, it would lose liquidity.

"If we converted GKOs for Eurobonds, the bank's liquidity disappears immediately, because if all bonds go to the market, they will not be traded," Kosogov said.

He said that most banks were likely to swap their clients' portfolios, while keeping their own as liquid as possible.

Russia's heavy burden of short-term domestic debt has unnerved investors who are fearful that the government will not be able to meet its obligations because of its poor tax collection.

The fears triggered a massive outflow of foreign capital from the Russian financial market, putting heavy pressure on the ruble and prompting rumors about a possible devaluation.

But now that Russia has secured a $22.6 billion credit from the International Monetary Fund, the World Bank and the Japanese government, the devaluation risk has diminished.

Fridman said that short-term T-bill yields would go down quickly now that Russia had the stabilization credit.

"Of course, the credit as it is not enough, but concerning short-term debt, investors can be calm," he said. "Yields will go down to 30 percent annual in one or two months."