Russian Central Bank revives anti-crisis tools

As Russia’s economic growth slows down and lending falls, the Central Bank is bringing back measures used during the liquidity squeeze of 2008-2009.

The Central Bank will now be refinancing banks not only on collateral of loans to companies with international rating, but also on loans to state-run strategic enterprises without international ratings. Audits of many of them have not been carried out because of the secrecy of production (for example, defense enterprises or the nuclear industry). There are more than 300 such organizations in Russia, business daily Vedomosti reports.  

Central Bank initially applied this measure in order to boost liquidity in the banking sector in 2008-2009. The bank terminated it when it became clear that the economic situation improved and the financial sector accumulated excess liquidity, Vedomosti reports.

However, the new chairman of the Central Bank Elvira Nabiullina says there should be no parallels with the crisis years.

"We are speaking of those enterprises only whose loans are government insured” Nabiullina  told Vedomosti.

At the peak of the crisis in February 2009, Russia’s Central Bank included more than 100 strategic enterprises with no international rating in the list of organisations, whose notes and loans were taken as collateral for refinancing by the Central Bank, Vedomosti reports.  

Big state-owned banks were the main beneficiaries from the refinancing as the majority of loans to strategic enterprises were on their balance sheets, business daily Kommersant reports.

Such assistance may be needed again, the newspaper quotes experts. The Russian economy is slowing down: it grew just 1.6% in the 1st quarter of this year compared to 4.7% a year earlier.

Corporate lending has also fallen sharply to 14% in January – April this year from 24% for the same period in 2012, the newspaper quotes Higher School of Economics data.