08 June 2004 00:00
Russian interbank rates triple amid domestic default fears BANKING:
ByLine: By CHARLES BATCHELOR and ANDREW JACK
Lending in Russia's fragile interbank market jumped sharply yesterday on
fears of defaults in the domestic banking sector, following a clampdown by
the Central Bank, which could signal the start of a broader shake-up.
Amid reports that a number of western financial institutions had pulled their
credit lines entirely, traders said interbank rates had more than tripled to
about 10 per cent yesterday, from 3 per cent last Friday.
The increase came after Russia's Central Bank took the pioneering step
last month of closing Sodbusinessbank under new money-laundering regulations,
while KreditTrust, another Russian financial institution, warned on Friday it
planned to go into voluntary liquidation. The bank reversed its position
yesterday and said it would resume operations later this week.
ABN Amro, which had been mentioned in connection with Russian reports of
western institutions pulling credit lines, said it had severed some
correspondent relationships with banks around the world, including Russia,
but this was part of a wide-ranging review.
"We have been reviewing some of our accounts," the bank said.
"In some locations we have decided not to offer some services purely on
the basis that they do not fit with our strategy or they are very inactive
accounts."
ABN Amro said Russian banks were among banks affected, but that it was not a
peculiarly Russian phenomenon.
Investors' concerns were also fuelled by reports in the Russian media of
a 'black list' of other troubled banks set to be targeted by the
authorities in the coming weeks, although the ministry of the interior and
the Central Bank both denied the suggestions yesterday.
Russia's Central Bank reacted to the jump in interest rates by stating
that it would provide liquidity to shore up the market. However, analysts
said the moves could mark the beginning of a broader shake-up in the sector.
Richard Hainsworth, head of RusRating, a bank rating agency, said: "This
is a storm in a tea-cup. We are not planning to change any of our ratings
beyond normal upgrades and downgrades. The current concerns are tightly
focused around these two banks."
However, he and other analysts stressed that Russian banks had been acquiring
credit too easily and that further restructuring was required, which could
lead to more defaults.
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