President of Russia Dmitry Medvedev: Dear Colleagues!
We agreed some time ago to meet and discuss the situation in the banking sector, and of course to talk about how this situation will affect the Russian economy in general.
I should begin by saying that the recent priority measures have helped to stabilise the situation, at least in the banking sector. And we all know about the decisions that have been taken, including replenishing the capital of our major banks.
In recent months we have allocated 950 billion roubles [about $30 billion] for so-called subordinated loans. The cash assets of public corporations that are temporarily available have been placed on deposits and invested in commercial bank securities. Finally, the Deposit Insurance Agency has gone into action, rehabilitating individual banks and taking control of the situation as a whole.
Statistics compiled by the Bank of Russia on the status of short-term liquidity of banks show just how effective these measures have been. Short-term liquidity as a whole is good and has been stable since October 2008.
The same is not true of long-term liquidity, or so-called long-term money. In this area there have been problems with refinancing, which of course have a negative effect on the general level of confidence within the financial sector, affect the activity of investors, and increase the amount of risk.
We need to make some more operational decisions. We have already begun to discuss these in this forum, and the government cabinet has discussed these problems as well, including increasing the capitalisation of banks.
In the near future there will be changes in the federal law on banks and banking activity. This might extend to their market capitalisation, but we also need to identify key or additional measures for public support of increasing the banks’ capital.
On the basis of our encounters the Bank of Russia has started work on changing the terms of refinancing secured by various types of assets, which used to be a problem. However, for most industrial companies bank loans are still hard to come by.
Not long ago some of the people here met in the Machine Building Production Plant Salut, a meeting that was devoted to supporting the real sector of the economy. Of course the subject was the exorbitant lending rates and the outright impossibility of obtaining loans at times.
That is why we agreed to meet separately to discuss all these topics, to talk about other measures for stabilising the banking industry and, as I said, about the provision of loans, the discount rate, interest rates, in short everything that seems particularly important at the moment.
First I would like to ask the Chairman of the Central Bank and Deputy Minister of Finance to say a few words.
Chairman of The Central Bank Sergei Ignatiev: In December, the situation stabilised. Whereas deposits in October were down by about 360 billion roubles [over $11.3 billion], in November they remained virtually unchanged (there was a slight decrease of 12 billion roubles), and the December increase was significant, some 400 billion roubles.
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As for Russian banks’ lending to the economy: there has been a slight increase, but unfortunately it is very small. The total amount of loans granted to the real sector and the population rose in December by 1.3 percent. I have already excluded so-called exchange rate differences, that is, the impact of the rouble weakening against the dollar.
That increase is less than in previous months because the normal pace for our economy is about three to four percent per month, but in the new circumstances I personally think that about two percent a month is optimum. In December it was less than 1.3 percent.
The situation is different in different banks. I hope that in the coming months we will be able to find ways to increase the current momentum.
Deputy Prime Minister and Finance Minister Alexei Kudrin: Dmitry Anatolyevich, we have decided to increase lending to the real sector, which is after all the primary function of the banking system. There are two sets of factors here, two sets of measures.
First and foremost are the measures to ensure the banks’ access to liquidity. Here the Central Bank has put in place a broad range of measures, and this is already being reflected in the figures.
The second set of measures is linked to establishing a system to support strategic enterprises. This group includes the regular decisions of the Commission on Stability in the Economy.
Dmitry Medvedev: Stabilisation.
Alexei Kudrin: The stabilisation of the economic situation.
Another decision provides for supporting and monitoring strategic enterprises. There are 294 of these companies, plus a special working group to monitor and support the defense complex has been created. It also involves several hundred companies — a final list will be determined at the next meeting.
In addition, there are working groups in the regions of the Russian Federation that select companies to work with banks to obtain loans. These working groups include representatives from our leading banks: Sberbank [Savings Bank of the Russian Federation], Vneshtorgbank [VTB Bank], Rosselkhozbank [Russian Agricultural Bank] and various regional banks.
The main objective of these measures in the context of growing risks and uncertainties in lending to certain sectors of the economy is to support enterprises with lending resources and assess the risks, risks that the state sometimes can share.
In the coming days there will be a government decree that will provide state guarantees for businesses that will be eligible for these loans. We’ve agreed that the value of government guarantees will be 70 percent for defense companies and 50 per cent of total debt for enterprises not in the defense sector, but that are strategic enterprises or local economic mainstays.
(The Minister further outlined the measures taken concerning lending to the real sector and the work of the Deposit Insurance Agency.)
And another group of measures to support the banking system involves banking supervision by the Central Bank: this means monitoring the performance of banks. There must be strict compliance with all the regulations of the banking system, since banks have to inspire confidence.
The banking system is crucial for making payments, the accumulation of citizens’ assets and savings and companies’ transactions. Therefore in a crisis situation, in a situation in which the value of certain assets drops and payments on the debt of some companies become overdue, we are monitoring issues relating to increasing the capitalisation of banks and consequently to an increase in capital.
Currently, the Ministry of Finance jointly with the Central Bank and the Ministry of Economic Development is considering the question of the value of such capitalisation. We will submit proposals for additional capitalisation of banks, including Vnesheconombank [the Bank for Development and Foreign Economic Affairs], although it is not under the direct supervision of the Central Bank and functions as a state corporation.
Nevertheless, it has a special function on behalf of the state to support the banking system, issue subordinated loans, involve itself in the securities market, and carry out lending for large and important infrastructure projects as an agent of the government. For these reasons capitalisation and the provision of credit resources for Vnesheconombank is also now being finalised.