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Russian Government Saves the Banks

The first auction of unsecured loans for Russian banks was held yesterday

In the position of liquidity crunch, the banks borrowed just just a bit more than half of $ 27 bn. Average interest rate on the five-week loans is 9.89 percent.

As Russian business web-site Expert Online reportyed, not all the Russian banks received the loans. Only 116 B or B3 or higher rated banks (which is less then 10 % of all banks) could take part in the auction.

The government is simply not able to provide loans to every bank, and could not think of a better criteria to chose those favored than their international rating. But there is a vicious circle – banks that have the most serious liquidity problems are not top-rated, and thus are not given loans. Another analysts said that in the face of current crisis, rating agencies often underrate banks.

Besides, not all banks of those invited decided to borrow. Many of them where surprised to see state-owned and BB rated banks, who have access to cheaper credit auctions, among participants.

Inter-bank market reacted to the news positively: interest rates dropped from nearly 20 to 10 – 12 percent, said Dmitry Popkov of Petrokommerz bank.

In a long-term perspective, it is important to see how the loans will be used. Experts of Raiffeisenbank fear the money can be spent of currencies, like it happened to the help funds the state offered earlier. It is said that Central Bank has called banks not to weaken the ruble. But such pressure is inefficient when individual clients of the banks panic and buy vast amounts of dollars and euros.