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Sep. 30, 2008
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VEB to Guarantee Redemption of All Corporate Debt by Year-End
If needed, the Central Bank of Russia (CBR) has been recommended to grant stabilization loans to the banks without any security. VEB will step in to sort out problems of the corporate sector; this bank will receive up to $50 billion from the CBR to refinance the loans. The price of these efforts is no less than 8 percent decline in the governments foreign exchange assets and potential downgrade of the countrys rating.
The RF cabinets portfolio for stabilizing financial system of the country hasnt been drained yet. The decisions of the yesterdays anti-crisis meeting of the Governments Presidium relate to the nearest three months. Prime Minister Vladimir Putin announced four extra measures, including granting up to $50 billion to Vneshekonombank (VEB) to refinance the companys debts.

Any Russias bank or company may address Vneshekonombank for raising a loan to pay off its debt to foreign creditors under the loans raised before September 25 of this year, Putin said, specifying that the CBR wouldnt appropriate more than $50 billion to VEB for that purpose.

The CBR last released the data on debts of Russias companies April 1. The aggregate foreign debt of Russia was $477.1 billion, the debt of banking sector amounted to $171.4 billion, other sectors (less the state bodies) accounted for $264.6 billion. The banks were to redeem $15.2 billion as of the fourth quarter, non-bank loans due to mature stood at $23.9 billion, and $3.9 billion was to be paid by this year-end to settle the interest.

The promised $50 billion will cover all payments under the current debt of the banks and the companies till the end of this year; the amount was estimated at $35.9 billion as of the first quarter. Under the September estimates for the debts that non-residential banks will present by New Year, the banking sector will have to pay around $15 billion, while the non-banking one will refinance up to $50 billion.

The amount corresponds to around 8 percent of the governments foreign exchange assets, where the Reserve Fund and the Next Generation Fund currently account for roughly $250 billion and the own reserves of the CBR stand at around $300 billion.

Another decision of Putin also relates to VEB. This bank will get 75 billion ruble of 250 billion ruble that President Dmitry Medvedev ordered to appropriate as a half of the state investments in sustaining the stock market. Overall, Medvedev pledged to inject 500 billion ruble in the stock market and VEB is likely to act as the key operator for the funds.

The last two actions that Putin announced yesterday related to the CBR. This bank will be authorized to make agreements with certain credit institutions for redeeming a portion of losses in time of the interbank crediting. Most likely than not, the matter at stake is three banks controlled by the state Sberbank, VTB and Gazprombank.

The last proposal appears the most sensational. It is recommended to grant stabilization loans to the banks without any security.

All the Article in Russian as of Sep. 30, 2008

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