Translated material
Good deal
The Central Bank issued a loan to VTB in the amount of 6.9 billion rubles
VTB Bank turned out to be the first Russian bank to ask for and receive a loan from the Bank of Russia secured by a loan portfolio. According to the first deputy chairman of the Central Bank, Alexei Ulyukaev, another large, but non-state bank will also receive funds from the regulator in the near future. Market participants believe that a loan from the Central Bank does not necessarily indicate that the bank has liquidity problems. True, the banking system as a whole is experiencing a shortage of funds. And to improve the liquidity situation, the Central Bank also yesterday announced a temporary reduction in required reserve ratios for bank liabilities. Market participants believe that thanks to this measure, the Russian banking sector will receive an additional 50 to 70 billion rubles.As Alexey Ulyukaev said yesterday, VTB applied to the Bank of Russia for a loan in the amount of 6.9 billion rubles. The loan term was six months, the rate was 7.5% per annum. As collateral, VTB pledged the rights of claim on a loan issued to Rosneft. According to Mr. Ulyukaev, the possibility of obtaining such loans from the Central Bank (secured by bills and loan portfolios) has existed for banks for two years, but until October, none of them applied to the Central Bank with such a request. VTB was the first to receive this kind of loan, Mr. Ulyukaev said, adding that a decision has now been made to provide a similar loan to another large non-state bank. He did not specify which bank he was talking about.
“This is very good news for the market. In fact, the Central Bank launched another mechanism for refinancing, and VTB was the first bank to use this tool, says Maxim Roskosnov, an analyst at Renaissance Capital. -- VTB received relatively long-term money at an attractive rate based on today's market conditions. The fact that the bank received a loan from the Central Bank does not indicate a liquidity shortage at VTB, but is a manifestation of normal banking activities.” Alfa Bank analyst Natalia Orlova shares a similar opinion: “It is unlikely that the bank is experiencing liquidity problems; most likely, VTB needs funds for business projects. In particular, VTB President Andrei Kostin recently announced his intention to buy the loan portfolios of other banks.” Let us note that yesterday Mr. Kostin also stated that the credit institution has no problems with liquidity.
VTB confirmed yesterday that it had received a loan from the Central Bank. “We are considering the possibilities of borrowing on the domestic and foreign markets,” Vasily Titov, deputy chairman of the bank’s board, told Vremya Novostey. “As for the Central Bank loan, this is an extremely profitable borrowing based on the current market situation.”
To resolve the situation with the liquidity shortage in the market, the regulator, starting today, has reduced the required reserve ratios for the obligations of credit institutions to individuals in Russian currency from 4 to 3%. The standards for obligations to non-resident banks in rubles and in foreign currency, as well as for other obligations of credit institutions in rubles and foreign currency, were also lowered - from 4.5 to 3.5%. These measures will be in effect for three months: starting from January 15, 2008, required reserve standards are established at the current levels (4.0 and 4.5%, respectively). In addition, from November 1, the averaging coefficient for calculating the average the amount of required reserves was increased from 0.3 to 0.4 (the higher the ratio, the less reserves the bank has to pay).
The Central Bank explains the temporary reduction in standards by “additional need for liquidity on the part of credit institutions.” As you know, previously the heads of the Bank of Russia argued that in October-November Russian financial institutions would need funds due to the consequences of the credit crisis on world markets. Not long ago, the Central Bank already took measures to provide banks with additional liquidity. In particular, it made it easier for credit institutions to refinance conditions by reducing by two steps the requirements for the level of international rating of the issuer necessary for inclusion of its bonds in the Lombard list.
According to Maxim Roskosnov, due to the temporary reduction in standards, banks will receive an additional approximately 50 billion rubles. The estimate of Merrill Lynch analyst Yulia Tsyplyaeva is more optimistic - about 70 billion rubles. “At the end of October, Russian banks and their clients will face significant tax payments to the budget, so they will need large financial resources,” notes Ms. Tsyplyaeva. -- In addition, due to the crisis, banks have practically lost sources of borrowing funds on the foreign market. The total volume of funds required by Russian financial institutions is $34 billion (just under 1 trillion rubles).” As is known, earlier the first deputy chairman of the Central Bank, Alexey Ulyukaev, stated that the Bank of Russia is ready to “provide up to 1.5 trillion rubles through refinancing channels.”
The fact that the Central Bank responds to market needs in a very timely manner pleases analysts. “The regulator quickly makes decisions, thereby helping banks cope with the shortage of funds,” Ms. Tsyplyaeva believes. She believes that the measures taken by the Central Bank will be sufficient. However, Maxim Roskosnov from Renaissance Capital has a different opinion. According to him, “lowering standards will not solve the liquidity problem, but will still slightly ease the situation for banks.” He believes that the recent decision of the Central Bank to expand the pawnshop list will be of greater importance for the sector. “Despite the measures taken by the regulator, it is unlikely that the liquidity shortage will be completely avoided. At the very least, it is unlikely that rates on interbank loans in October-November will drop to the pre-crisis spring level of 3-5% per annum,” Mr. Roskosnov believes.
Some bankers expect liquidity problems to be resolved before the end of this year. As the head of VTB Bank Andrei Kostin said yesterday, an improvement in the market situation is possible as early as the end of December.
The Central Bank does not rule out raising the refinancing rate, said First Deputy Chairman of the Central Bank Alexey Ulyukaev. As PRIME-TASS reports, the bank has not yet made any decisions on the refinancing rate, but if necessary it can be raised. According to him, by the end of October the Bank of Russia will probably consider raising the annual inflation forecast. At the moment, the official inflation forecast is 8%, the refinancing rate is 10% per annum. It is believed that the usual difference between inflation and the refinancing rate is approximately 1.5-2 percentage points. Inflation in September accelerated to 0.8% from 0.1 in August, and officials already assume that its value for this year will exceed last year's - 9%.