Translated material
What lies well
The state may begin purchasing quality assets from troubled banks
Russian authorities are looking for new ways to support financial institutions . In addition to the loans already provided in various forms to the banking sector, the government is considering the possibility of purchasing high-quality assets from banks that are experiencing liquidity problems. The President - Chairman of the Board of VTB-24, former Minister of Finance of Russia Mikhail Zadornov told reporters about this yesterday. In addition, the authorities intend to develop a mechanism for the Bank of Russia to provide loans secured by mortgage bonds. Experts, including Mr. Zadornov, recognize that the crisis in Russia extends beyond the financial sector and it is necessary to minimize its consequences for enterprises.As Mr. Zadornov said yesterday, a specially created fund or an already existing state organization can buy out good assets from problem banks. As an example, he cited the experience of Kazakhstan, which suffered significantly more from the financial crisis than Russia. According to Mr. Zadornov, a similar fund exists in Kazakhstan, its capital is $1.5 billion. In Russia, the size of a similar fund could be approximately $15 billion, given the difference in the size of the economies of the two countries.
“The number one task for the government now is to maintain liquidity in the banking sector. Until recently, only the largest banks, which have access to auctions of the Ministry of Finance and the Central Bank, received assistance from the authorities. The problem is that banks keep the money they receive and do not lend it to other financial institutions,” says Interfax-CEA General Director Mikhail Matovnikov. - At the same time, many medium and small banks that do not have securities in their portfolio and therefore do not participate in repo operations have good assets. Accordingly, if such a fund is created, banks will be able to receive financing from the Central Bank.”
It is noteworthy that quite recently the head of Russian Railways, Vladimir Yakunin, said: “It makes sense to create a special state agency. It will support banks that have interesting assets, taking these assets to secure the money that the state will issue.” But the creation of such a fund will take time, and most likely the government, which has repeatedly stated the need to quickly respond to events, will assign the functions of a buyer of good assets to an existing government organization. After all, while a special government structure is being created, good assets may turn into bad ones.
Another initiative, which is also being discussed in the government, is the issuance by the Central Bank of loans to banks secured by mortgage-backed securities. According to Mr. Zadornov, banks now have enough first-class mortgages: we are talking about loans for secondary housing, issued with a large down payment from the borrower, for which there are no arrears. But the parameters of such securities have not yet been determined. According to Mr. Zadornov, many Russian banks are interested in the emergence of such a mechanism.
According to Vremya Novostey's knowledgeable source in banking circles, large market participants, including VTB, Gazprombank, and AHML, could evaluate banks' mortgage portfolios and issue guarantees for them. Accordingly, banks could issue mortgage-backed securities and then receive loans from the Central Bank using their collateral.
However, experts say that if now we can talk about buying back good assets from problem banks, then soon Russia may face another problem. “In saving the financial system, the state is now spending a lot of money,” notes Mr. Matovnikov. - At the same time, according to my forecasts, by the spring of 2009 the financial crisis may transform into an economic one, so it is possible that we will have serious complications in the economy. In this case, a lot of resources will be needed to buy out already bad assets.”
Mr. Zadornov also says that the situation may worsen: “The situation has gone beyond the financial sector. Large and medium-sized borrowers must fulfill their obligations under offers and loans. If enterprises are not helped to partially reduce their debt now, then non-payments will go very deep into the economy.”
In September, VTB-24 recorded a record increase in deposits - 13 billion rubles. “In the banking system, over the last two weeks of September, there was zero growth in deposits, this indicates that there is a redistribution in the system, but it is too early to draw final conclusions,” said Mikhail Zadornov. He admitted that from September 15 to 20 there had been “unrest among bank depositors in large cities.” “However, now there are no global problems with depositors, and if the government and the Central Bank act quickly, they will not arise,” he believes. Based on the results of nine months, VTB-24 increased its assets according to RAS by 1.5 times, to 490.4 billion rubles, as follows from the bank’s financial statements. Net profit increased 14 times, to 4.6 billion rubles. (for the same period last year was 313 million rubles). The bank's own funds as of September 30, 2008 reached 57.8 billion rubles, which is 1.3 times more than at the beginning of the year.