08/13/1998 19:21:36 ANALYSIS-Russian bank system seen surviving crisis
By Julie Tolkacheva
MOSCOW, Aug 13 (Reuters) - Russia's banks are running
scared, scrambling to boost liquidity and honour their debts,
but the central bank says the system as a whole is safe and
most analysts agree it will probably survive.
The local interbank market, squeezed by tight fiscal and
monetary policies, has virtually ground to a halt as some banks
defaulted and others, including major institution Inkombank,
pulled out of the market. An Inkombank spokesman said the bank
met all of its obligations.
Analysts said the market as a whole was characterised by
mutual distrust, although the problems were most likely
"The current problem is a problem of a lack of short-term
liquidity. I mean for several days," Andrei Ivanov, banking
analyst at Troika Dialog, told Reuters.
"It is not connected with any global problems of the
banking system, which cannot be solved in a short time.
Fundamentally, (big) banks are stable and they can meet their
Banks dumped government securities on Thursday in their
desperation for roubles, sending yields for short-term paper
through the roof. The stock market was also hit, with the
leading share index losing some 20 points so far this week.
But most analysts agreed the banking crisis was not fatal,
although the lack of international accounting standards and the
unwillingness of Russian banks to disclose information made it
difficult to assess the scale of problems.
In the mid-1990s, there were more than 2,500 commercial
banks in Russia. Now there are less than 1,600 and that number
is shrinking fast as the less solvent institutions are weeded
"My sense is that the number of banks that are actually in
trouble is not that large," said Margot Jacobs, banking analyst
at UFG. "But it is difficult to distinguish between real
problems and fear of problems."
But Tatyana Tsynkush, a fixed income analyst at Alfa-
Capital, said the problems were serious.
"I think this is a systemic crisis, fraught with thebankruptcies of the biggest banks," she said.
Russia endured one systemic banking crisis in 1995, when
several banks went bankrupt after heavy defaults on the
interbank market. But Ivanov said the local banks had grown
more mature, turning into real banks from a little more than
the brokerage firms they used to be.
Most of the big banks, such as UNEXIM Bank, MENATEP
<MNTP.MM> and Inkombank <IKMBy.BE> have set up financial-
industrial groups, where the banks serve the accounts of big
industrial companies. All of the biggest banks are carrying out
aggressive campaigns, trying to branch out into the retail
Jacobs said that between five to seven of the biggest banks
still get about 30 percent of their financing from the
interbank market, making the situation more dangerous. But she
added that the average rate of financing from the interbank
market was 10 to 20 percent.
Analysts said the problems started in the spring when the
government forced some big banks to pay overdue taxes for
companies in their financial-industrial groups.
The central bank took several steps to tighten monetary
policy, for instance stopping fixed-rate Lombard auctions and
cutting the credits to seven days from one month. The measures
were meant to force banks to sell dollars, but fears of a
rouble devaluation, along with a desire to get funds to meet
foreign credit and forward liabilities, made banks sell
government paper, pushing up yields.
At the same time, the measure deprived banks of the
possibility of arbitrage deals and squeezed the liquidity of
the interbank market, Ivanov said.
The central bank recently introduced overnight credits for
the biggest banks, but the banks failed to use them properly
because of poor risk management, Tsynkush said.
"What is happening now is in no way unexpected. It is a
result of tough measures by the central bank and the financial
markets' crisis," Ivanov said.
The central bank on Thursday relaxed somewhat its tight
policy by increasing the number of banks that have the right to
borrow overnight from it.
Analysts praised the decision.
"Today's central bank decision on overnight credits is an
effort to solve the problem in a softer way, without massive
bankruptcies," Tsynkush said.
Ivanov said that, although smaller banks could go as a
result of the crisis, big and medium-sized institutions would
"The market is most likely to return to normal in a week,"
he said. "I think the central bank will keep the rouble from
devaluation in the next several weeks."
((Moscow Newsroom, +7095 941-8520