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Eastern Europe
September 1, 2017 www.intellinews.com I Page 17
that they have been cutting exposure to the bank in a move reminiscent of the 2004 banking mini- crisis. That year, the CBR pulled the bank license of the aptly named Sodbiznes bank for money laundering and stealing deposits – the first time it had ever cancelled a bank license.
Rumours of a CBR “black list” of other bank licenses that were about to be pulled caused the interbank market to seize up and precipitated a real banking crisis that saw Guta Bank, a major commercial bank, go to the wall.
The 2008 collapse of Lehman Brothers lead to one bank failing in Russia, Kit Finance, but that was rescued by state-owned Russian Railways (RZD) by lunchtime the same day.
However, Russian bankers have become battle hardened and are now less likely to panic than they were back then.
The central bank has also acted decisively in this crisis with its decision to take direct control of Ot- kritie, the first systemically important bank to need a bailout. Rather than just lend the bank money (the CBR made one unsecured loan to Otrikite earlier this month) the central bank has put itself in the unorthodox position of actually becoming the owner of the bank, resulting in the weird situation
where the regulator is also a market participant.
However, this plan has the advantage of dodging the need for a moratorium on the repayment of the bank’s credits or a bailout of depositors using the Deposit Insurance Agency (DIA). The idea is that backed by the most solid investor a bank can possibility have Otkri- tie’s doors remain open and it is business as usual.
This solution stands in stark contrast to the collapse of PrivatBank in Ukraine in December last year where the National Bank of Ukraine (NBU) has been left to pump in billions of dollars to fill a $5bn hole in the bank’s balance sheet. The CBR’s plan is prob- ably by far the cheapest option available.
Nevertheless, the Otkritie takeover has left the Russian financial community nervous as evi- denced by the soaring repo deals, and the CBR has also promised to make more cash available for the sector, without being specific.
However, the Russian central bank is really good at dealing with crises. In 2008 the CBR called all the heads of the largest banks in for a meeting and calmed collective nerves with promises of support. As Russia moves through each of these financial crises its creditability is only improved, which allows cashless solutions to wobbles in confidence.
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