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 Russia's financial sector is reeling from the economy's slide
towards recession, a plunge in the value of the rouble, and Western
sanctions over the Ukraine crisis, which have restricted banks'
access to international capital markets, sharply raising their
funding costs.
Finance Minister Anton Siluanov told reporters on Friday that banks
could start receiving the additional capital early next year, and
that the law would mean the budget could slip into a deficit of
around 0.8 percent of gross domestic product.
"This 1 trillion will make it possible to increase the capital of
the banking system by around 13 percent," he said.
Once the law is approved by the upper house and President Vladimir
Putin, it will allow the Finance Ministry to issue up to 1 trillion
rubles of OFZ treasury bonds, which it will transfer to the Deposit
Insurance Agency, a state corporation.
The agency would then give the bonds to banks deemed key to the
wider economy - which were not specified - in exchange for
subordinated debt or preferential shares in the banks.
Siluanov said the ruble's slide, which has made it hard for the
banks to obtain the currency they need to repay foreign loans, meant
the banks were unable to meet capital adequacy ratios.
ECONOMIC STIMULUS NEEDED
But Putin made clear two weeks ago that the banks also needed
capital to stimulate lending, saying in his state of the union
address that funds would be provided "under clearly specified
conditions to be funneled into the most significant projects in the
real economy".
Many economists say Russia will slip into recession next year and
that the depth of the drop will depend largely on the price of oil
and Western sanctions. It is also unclear how long the central bank
will keep interest rates at 17 percent, suffocating for the economy,
to try to support the rouble.
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The State Duma passed the banking capital bill in all three readings
in an accelerated process on Friday.
The state had already provided additional capital to banks including
VTB <VTBR.MM> earlier this year.
The central bank also eased regulation of the banking sector this
week to help stabilize the rouble <RUB=>, down some 45 percent
against the dollar this year, and Putin has promised an amnesty for
those returning capital to Russia.
In 2008/09, the state banks VTB and Russian Agricultural Bank
(Rosselkhozbank), both of which are now subject to Western
sanctions, were helped by a similar recapitalization program, along
with private banks such as Alfa Bank.
The head of the State Duma's financial markets committee said
Russia's top lender, Sberbank <SBER.MM>, would not receive capital
under the measures, but could receive additional capital directly
from the central bank if needed.
($1 = 60.4373 rubles)
(Editing by Elizabeth Piper and Kevin Liffey)
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