President of Russia Dmitry Medvedev: Colleagues, we are here to discuss the current situation in the banking sector. We have been planning this for a long time. The Government holds such meetings regularly.
Overall, timely support measures enabled us to stabilise the situation in the banking sector, establish a system of collateral-free credits for banks and extend subordinated loans totalling almost 13 trillion roubles [more than $31 billion]. Thus, we managed to resolve the problems of topping up banks’ cash resources, keeping the country’s settlements system working normally, and, probably most important of all, keeping people’s savings safe.
But as you know, individuals and organisations find it practically impossible to borrow at the moment. The biggest obstacles are well known: high interest rates, often in excess of 20% per annum, and, especially worrying for the banks, an increase in overdue debts.
All of this has created a sort of vicious circle: companies, above all in the industrial and manufacturing sector, cannot afford to borrow under these conditions, and the banks themselves, confronted with increasing overdue debts, are often afraid to lend.
The Government has taken a number of different steps to improve the situation of late. The Central Bank has lowered the refinancing rate to 12.5 percent. This is useful.
Total lending by banks to economic enterprises should be at least equivalent to the amount of state support put in. For the borrowers, the interest rates on such loans will be equivalent to the refinancing rate plus three percent.
Furthermore, the state will play a more active part in making state funds available for topping up banks’ capitalisation. For every rouble contributed by shareholders, the state will contribute three roubles. But what I want to know now is, has this decision actually been approved? Where is the legislation? Where is the draft law?
Deputy Prime Minister and Finance Minister Alexei Kudrin: The draft law has already been drawn up and is currently going through the final approval procedures. We have literally only until the end of the week to complete this process in due fashion.
Dmitry Medvedev: In other words, next week, the draft law will go to the parliament.
Alexei Kudrin: Yes.
Dmitry Medvedev: Good.
It has also been proposed to introduce a procedure for using state bonds to increase banks’ capitalization. This is currently under discussion, and it would be good to come to a final decision.
Finally, there was also the proposal to provide state guarantees to the country’s most important enterprises, but this has turned out to be something of a fiasco, to put it mildly. At first, as you recall, we discussed the idea of providing state guarantees in the form of subsidiary liability.
Everyone agreed with this idea and figured this would be sufficient, given that it is customary for such guarantees to be subsidiary in relation to the debtor’s principle liability. A total of 300 billion roubles were allocated for this state guarantee system, but not a single rouble has actually been spent. In other words, this plan was a failure.
I am not going to point the finger at anyone specific right now. In any case, it seems that the banks themselves should have given some kind of signal that they would be reluctant to accept this particular system of providing state guarantees.
Whatever the case, we now have to complete work on drafting the legal provisions for providing state guarantees on the basis of the state’s joint liability for the commitments covered by the guarantees in question. How much time will this work require?
Alexei Kudrin: The draft law is ready and is currently at the Ministry of Justice going through the approval procedure. This process will be completed by the end of the week.
Dmitry Medvedev: Good. We need to get all of this underway as soon as possible, because everyone is waiting for this money, but the state guarantee system is still not up and running yet.