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. Last Updated: 07/27/2016

2-Month Wait for Insured Depositors




Thousands who were told the Central Bank would ride to their rescue and pry their savings out of troubled commercial banks learned Thursday that it will be mid-November before most of them will see a single one of their fast-devaluing rubles.


Already the ruble, which was trading at 6.2 to the dollar in mid-August, was Thursday selling at 16.78 on the Moscow Interbank Currency Exchange -- which means a September ruble already buys barely a third of what an August ruble bought.


And as the Central Bank unveiled its bailout program Thursday, some glum individual depositors were asking: What will an October ruble buy, much less a November ruble?


Those with U.S. dollar-denominated savings accounts will only be slightly better off, hit hard by a Central Bank ruling that The Associated Press described as "amount[ing] to direct confiscation": Their dollars will also be paid out in November, but only in rubles, and at an exchange rate of 9.33.


"That is robbery," an angry customer said on NTV television. Another woman added, "How can you trust a state bank if you don't trust the state?"


The Central Bank was unmoved by such sentiments.


"We have now offered an alternative to the depositors," said Alexander Voznesensky, a spokesman for the Central Bank. "It is a tough alternative, but the bank cannot offer more."


Russia's most famous young national banks have struggled over the past two weeks to meet a run on their offices. The banks were badly hit by the government's decision to freeze its multi-billion-dollar debt market in state securities, where many had heavily invested. Suddenly short of cash, the banks began to turn away clients who wanted to withdraw money from their hard-currency accounts.


As lines formed outside of banks and ATM machines in Moscow and St. Petersburg, the Central Bank promised to insure 100 percent of the $21 billion Russians hold in individual savings by having accounts moved from commercial banks into the national savings bank, Sberbank.


It was a particularly painful blow for SBS-Agro and Inkombank, who more than most other banks had fought hard to win a share of the retail banking market away from Sberbank, which even before the crisis broke still held 80 percent of the nation's retail banking.


As details emerged Thursday, however, it became clear that the Central Bank's much-ballyhooed 100 percent insurance program would return only a fraction of the wealth of ordinary Russians who kept their money in the banking system.


Six banks -- SBS-Agro, Menatep, Inkombank, Promstroibank of Russia, Mosbiznesbank and MOST-Bank -- will be expected by Sunday to work out the logistics with Sberbank of transferring accounts.


Clients at those banks will then have about two weeks, until Sept. 26, to choose: either move to Sberbank and wait until mid-November to access their savings, or stay with their original ailing bank and hope to get something better and quicker. Many of even those six troubled commercial banks have managed to continue to give clients some or all of the money they ask for at the withdrawal window or the ATM machine.


One side effect of this may be that depositors have an incentive to try all the more furiously to get their money out of their commercial banks right up until the Sept. 26 deadline to leap into Sberbank, when all of those who have failed will put in applications that last day.


Meanwhile, those who held interest-bearing time-accounts -- investments in rubles or dollars for a fixed amount of time -- actually have no such option at all. Commercial banks have been forbidden from working with such accounts at all and ordered to send them to Sberbank.


No figures were available Thursday on how many people hold such time-accounts or how much money is involved. But such accounts, which paid interest and seemed safe to hold in the nation's biggest names in banking, were quite popular with, for example, employees of foreign firms.


"Many of our employees who trusted their banks enough to have time-deposits will now risk being wiped out," said Jamison Firestone, a managing partner at Firestone Duncan.


The Central Bank's plan has received a mixed reaction from the banks ordered to carry it out. Most bankers complained that their input had not been sought in drafting the plan, and said the details were still too murky.


At MOST-Bank, another bank with ambitious retail plans, First Vice President Alexander Polyakov told reporters that the state's de facto seizure of his bank's depositors amounted to "a mini-revolution."


"Instead of calming the population, the Central Bank has aggravated the problem immensely," Polyakov said.


But Menatep, SBS-Agro and Promstoibank officials said the deal ought to soothe depositors and indicated that they would not try to oppose it.


SBS-Agro was placed under the Central Bank's receivership Friday.


But Central Bank officials had to retreat from the SBS-Agro offices on Tuesday after a municipal court in Elista, the capital of the Southern Russia republic of Kalmykia, ordered a halt pending a hearing of a citizen's legal complaint.The verdict was returned Monday, with a speed that raised eyebrows among Central Bank receivership officials -- particularly after Kommersant Daily, a newspaper that has had financial dealings with SBS-Agro, splashed the story on its front page while virtually all other media ignored it.


"We were surprised and perplexed by the expeditiousness with which the case was dealt with by the court," said one Central Bank official, who did not want to identified.