Long-term liabilities

Russian authorities launch new global market support plan

“The abundance we have is coming to an end. Most likely, 2008 will be the peak year for oil and gas production in our country. There will be no more such income. In this sense, we are passing a historical milestone,” Deputy Prime Minister and Finance Minister Alexei Kudrin said yesterday morning, before a meeting with the president on financial markets, at another meeting on the 2009-2011 budget, organized by United Russia. Thus, one of the key Russian officials responsible for macroeconomic stability in the country openly admitted that the problems of the Russian economy are not limited to the negative reaction of financial markets to the global crisis.

The demographic situation also has a negative impact on the economy. “2008 is the year of the maximum number of people employed in the Russian economy. Even the most daring measures will not compensate for the number of people employed,” Mr. Kudrin emphasized. Recalling that oil and gas revenues currently account for 50% of the budget, he indicated that a gradual decline in the share of these revenues in the federal budget will begin, regardless of the price of oil. Further economic growth, the minister is convinced, can only be achieved by increasing labor productivity.

Yesterday, at a meeting with Dmitry Medvedev, it was decided to allocate a subordinated loan to the largest Russian banks in the amount of 950 billion rubles. for a period of five years. The purpose of these, as Mr. Kudrin put it, “preemptive measures” is not only to keep the financial system afloat, but also to preserve the conditions for the development of the real economy, which cannot do without loans. The development of the real sector, reducing the critical dependence of the Russian budget and the economy as a whole on oil and gas is becoming not just an abstract goal, but a necessary condition for development. Moreover, the strength of the oil and gas sector itself is in doubt. At least yesterday, Gazprom, Rosneft, TNK-BP and LUKOIL signed an appeal to the government with a request to provide them with loans so that they could pay off foreign creditors.

Yesterday afternoon, President Dmitry Medvedev convened an emergency meeting on economic issues. “Speed ​​is very expensive now. I would ask everyone to think about this on a daily basis,” he said. “All decisions should be made as quickly as possible - not only on this platform, but also on the government platform , transfer documents to the State Duma and, based on the results of the adoption of all necessary laws, very quickly issue decisions that clarify the laws. I mean government acts and acts of the Central Bank,” the president explained.

In mid-September, the authorities had already taken steps to maintain liquidity in the banking sector - more than a trillion rubles had been allocated. Yesterday it became known that the state is ready to provide loans to domestic banks for another 950 billion rubles. If earlier we were talking about short-term loans, this time the state gives banks money for five years. State banks will receive the main support. According to the president, the funds will be distributed as follows. Sberbank will be allocated up to 500 billion rubles, VTB - up to 200 billion rubles, Rosselkhozbank - up to 25 billion rubles. The remaining amount will be distributed among commercial banks.

By the way, if state banks receive money without additional conditions, then commercial banks can only claim an amount equal to 15% of their authorized capital, provided that the main shareholder of the bank allocates another 30% from its funds. According to Alexei Kudrin, such restrictions are justified. “The peculiarity of a subordinated loan is that it is provided by shareholders or others who want to support the bank. Accordingly, the Central Bank, as the main shareholder of Sberbank, will provide funds directly, and the government, as a shareholder, will support VTB and Rosselkhozbank through deposits of Vnesheconombank, to which funds from one of the national funds will be transferred,” he explained to reporters following a meeting with the president. Funds for state banks will be allocated in tranches; the amount intended to support private institutions will be allocated immediately. Obligations for a subordinated loan come last for the bank, which should serve as additional support for financial institutions.

Mr. Kudrin especially noted that these measures are exclusively preventive in nature. “We specifically emphasize that these measures are being taken proactively. Our Russian enterprises are operating stably and increasing their turnover. Stock quotes do not reflect their real value. And mostly those who need cash part with their shares,” he explained. According to him, the main problem of the Russian economy is the lack of long-term loans for the implementation of large-scale projects that have already begun. It is precisely this deficiency that the new measures are designed to fill.

Economists and analysts surveyed by Vremya Novostei consider the government’s actions to be correct. In their opinion, these measures are aimed at preventing a crisis in the real economy: having received government money, banks will be able not only to improve their financial situation, but also to continue lending to the real sector. The main thing is that this money does not end up in the accounts of state banks, but is used in the economy.

“Before, the authorities provided banks with short-term liquidity,” says Maxim Raskosnov, an analyst at Renaissance Capital. “Now we are talking about long-term loans that will help solve problems with further lending by banks to enterprises in the real sector and the population.”

A similar opinion is shared by Anton Struchenevsky, senior economist at Troika Dialog. “The state decided to support systemically important banks; this is the right measure from the point of view of long-term market development. In addition, private financial institutions will also be able to receive money. Thus, the authorities not only help banks solve problems with lending, but also, in fact, give a signal to the population that Russian financial institutions are now reliably protected. After all, one of the main tasks is to prevent panic among private investors.”

According to the chief economist of Deutsche Bank, Yaroslav Lisovolik, “banks will have more long-term money, the liquidity situation will improve. As for the impact of these measures on inflation, I do not expect it to be significant. It is likely that the rate of price growth will accelerate by 0.4-0.5 percentage points.”

But according to the President of the Association of Russian Banks, Garegin Tosunyan, government loans should be directed to a wider range of banks, and not just the largest. “This measure will certainly be effective if the money is quickly brought to those who are in need - not through unnecessary chains, but directly,” says Mr. Tosunyan.

Stock market participants reacted to yesterday's initiative by the authorities not so optimistically. Although immediately after the president’s statement, traders made an attempt to slightly raise the market, however, soon the quotes began to fall again - although this no longer looked like a collapse. As Stanislav Jarushevičius, head of the trading operations department at ING Bank, notes, although “this time the state invited banks to borrow long-term resources, in essence the current measures are not very different from the previous actions of the authorities.” “In both cases, the lion’s share of funds is received by state banks, which have not experienced any problems with liquidity and their financial condition is stable,” the specialist notes. - The problem is that other market participants - average banks - do not receive this money. Moreover, these measures do not solve the main problem - the trust of banks in each other, and this is the basis of the banking business. Banks still don't finance each other. In addition, it is already obvious to everyone that until the massive bankruptcies of banks and investment companies in the world stop, and the process of nationalization of financial institutions ends, there is no point in talking about any stability of the domestic market at all. Investors understand this very well, which is why yesterday they reacted rather restrainedly to the president’s statements.”

At the end of the day, the RTS index fell by 0.95% to 858 points, the MICEX index lost 0.96% to 744.76 points.

Trading on Russian exchanges began yesterday 2.5 hours later than usual; the Federal Financial Markets Service suspended trading even before the markets opened, apparently fearing a new collapse after American indices collapsed on Monday. At the same time, the regulator introduced new rules for the operation of exchanges, according to which, from October 7, trading will stop for an hour if indices have changed by more than 5% compared to the close of the previous day. If the indices change by more than 10%, then trading will be stopped until the regulator makes a decision. In addition, from today the regulator is introducing new requirements for the suspension of trading in securities included in quotation lists A and B. In particular, if the opening price or the weighted average current price of a security changes by more than 10% compared to the last closing price, trading on it is stopped for an hour; if the price change reaches 20%, then trading is stopped until the regulator makes a decision. The head of the service, Vladimir Milovidov, said on Monday that the FFMS intends to tighten these rules.

According to the results of yesterday's trading, VTB shares rose in price by 4.4%, Sberbank - by 2.8%. In addition, shares of LUKOIL, Rosneft and TNK-BP increased in price.

As Dmitry Parfenov, head of the analytical department of Prospekt Investment Company, noted in an interview with Interfax, the market is more likely to resume its decline. “We expected the market bottom to be at 900 points on the RTS, but now if the market goes to 840 points or lower, then it’s useless to look for the bottom. It can no longer be detected either by technical or fundamental analysis, since panic cannot be analyzed. Everyone will exit the shares without regard to prices, since in such a situation it will be possible to buy back the securities significantly cheaper. According to the fundamental assessment, we are very seriously oversold, recovery is inevitable, the only question is time.” And according to optimistic forecasts, it will take several months, or even a year, given the dependence of the Russian stock market on the world market.

Vera SITNINA, Natalia ROMANOVA