The Russia government says it will not nationalize private banks to help them through the crisis. Instead it plans to give them $9 Billion in subordinated loans and expect banks to restart credit activity.

Prime Minister Putin sent a clear message on Thursday that the government has no plans to take stakes in the charter capital of commercial banks. To boost lending in the economy, the state is ready to provide $9 Billion dollars to private banks in subordinated loans.

“We think it inexpedient for the Government to have a direct access to Tier 1 bank capital, which means we don't plan to buy the stock of private banks. First of all, the owners must bear the responsibility for their institutions – they shouldn't hide behind the back of the State. Secondly, the Government's entry into their capital could lead to a violation of rights of minority shareholders.”

But it's not easy money. The bank's private investors will have to add the same amount of cash to their capital that will be given by the state. That will make bank's owners share management risks and responsibilities. Anatoly Aksakov, Deputy Chairman of the State Duma’s Financial Markets Committee says $9 Billion won't save many, and hope the majority of those rescued will be regional banks.

“The economic and social role of regional banks is extremely important. I hope that this money won't go only to large banks. Many regional banks work more efficiently than big federal banks.”

The new measures come as evidence mounts that support measures introduced late in 2008 for the banking system are having unintended consequences. Economists say the short term Repo funding made available by the Government – to stem the liquidity crisis and support real sectors of the economy – is actually funding speculation against the Russian currency. Many have been taking long term short positions on the Rouble with the funds made available to them by the Central Bank. Evgeny Gavrilenkov, Chief Economist at Troika Dialog believes that tightening up on liquidity will force a major part of the speculation to end.

“Money markets don’t work these days, because a limited number of banks have access to the Central Banks Repo’s. If the Central Bank says, one day, that no more Repo’s are available, but Rouble liquidity is need for the economy, it means that those who accumulated dollars and euros in the previous weeks and months, they will be forced to start selling the savings. And it means that Rouble liquidity will come into the system.”

Currently the Central Bank provides around $22 billion in Repo loans every day. The adoption of a more nuanced approach to supporting system liquidity and the real economy, is expected to see a dividend for both the banking system and the Rouble.