Russian banks seek aid from government

Bloomberg

The association wrote to the Russian government after talking with banks including HSBC Holdings that had sought clarity about the capacity of some companies to meet obligations, Anatoly Aksakov, the association’s president, said in a phone interview from Moscow yesterday. The government hasn’t responded, he said.

"It would be most effective if the debt were restructured so it’s clear to everyone, creditors and borrowers, how the debt will be paid," Aksakov said. "The government has the money. Some companies and banks have rather large hard currency liabilities on their balance sheets."

Speculation of European bank losses on Russian loans drove declines in the euro against the dollar and yen yesterday. Russia has pledged more than $200 billion in emergency funding as plunging oil prices push the world’s biggest energy supplier into its worst economic crisis since Boris Yeltsin’s government defaulted on $40 billion of domestic debt in 1998.

The central bank expanded the ruble’s trading band against a target dollar-euro basket 20 times since Nov. 11 as the currency tumbled 35 percent against the dollar since August. Russia’s foreign reserves plunged 35 percent in the past six months.

"No one in the Russian government has ever suggested any debt restructuring was contemplated," said Eric Kraus, head of strategy at Otkritie Financial Company, a Moscow-based bank and brokerage. "The entire purpose of the slow, stepwise devaluation of the ruble was to allow companies to purchase sufficient foreign currency to repay debts maturing through 2010."

The euro fell to $1.2865 as of 2:46 p.m. in Tokyo from $1.3003 late in New York Monday. Europe’s single currency slipped 1 percent to 117.67 yen.

"People expect that part of these debts were from the European banking system," said Sebastien Barbe, a strategist at Calyon in Hong Kong, the investment banking unit of France’s Credit Agricole. "You already have a very weak banking system in Europe. If you have these Russian issues, the next step would be questions about whether similar problems will come out of other Eastern European countries."