The markets recovered strongly after their worst week since the 1998 default. At the end of a frenetic days trade on Friday the RTS ended on 1295 points, still 600 down on August. Fears for the banking system drove the sell off, with only government inter

Banks snapped up all the loans offered by the Central Bank Wednesday. The head of MICEX blamed the crisis on cash-poor banks failing to pay back those loans. Gazprom is set to buy the first sizeable Russian victim – Kit Finance. Analysts say rival AntantaPioglobal may be the next to fall.

Micex CEO Aleksey Rybnikov says the crisis mid week stemmed from a shortage of credit and confidence.

“The crisis is in the mass failure of repo repayments, which have snowballed since Monday.”

The biggest worry is that banks have practically stopped lending to each other. Experts fear further market falls as the extent of that breakdown is revealed. 

Trust Bank Chief economist Evgeny Nadorshin says that its possible further problems lay ahead.

“Until the end of this year we will experience problems on the money market, because we're reinstalling a lot of the links between financial institutions which are now ruptured.”

Analysts call the current crisis of confidence irrational as the fundamentals of the Russian economy remain sound. Nevertheless several banks such as Alfa have already sacked several high-profile traders, and more lay-offs are feared.