Press Clippings

10 July 2004Liquidity support for Russian banks

The tension in Russia’s banking sector appeared to be easing yesterday after Alfa-Group shareholders said they had injected Dollars 800m to support Alfa-Bank, the country’s largest private bank.

Vneshtorgbank, the second-largest state owned bank, also agreed to take control of Guta Bank, which last week closed its doors to depositors.

Depositors continued to withdraw money from the banks, albeit at a slower rate. Alfa-Bank said it saw a net outflow of Dollars 110m yesterday compared with Dollars 170m the day earlier and Dollars 220m on Wednesday. “The panic is subsiding, but the situation is still far from normal”, said Peter Aven, president of Alfa-Bank. The bank also said it would phase out its 10 per cent withdrawal charge from next week to calm down the panic. It is understood that the shareholders of Alfa-Group injected the money they had received as a payment for the sale of their share of TNK to BP.

Meanwhile, Vneshtorgbank agreed to buy 86 per cent of Guta Bank and promised it would resume normal banking operations next week. Russia’s central bank said it would deposit Dollars 700m at Vneshtorgbank to support the deal.

Guta Bank, which ranks 22nd among Russia’s 1,350 licensed banks, suspended its operations at the beginning of the week, sparking a wave of panic among Russian depositors. This has further undermined confidence in the Russian banking sector, which has not yet fully recovered from the 1998 financial crisis.

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