Published On: Wed, Dec 24th, 2014

Russian Central Bank Bails Out Struggling Top Lender Trust

Russian Central Bank

The Bank of Russia provided a 30 billion-ruble ($531 million) bailout for National Bank Trust, its biggest rescue since the ruble crisis began this month, Bloomberg reported.

The Deposits Security Agency will take control of National Bank Trust, one of the country’s top 15 lenders by retail savings, while the central bank selects an investor to help shore up the company, the Bank of Russia said in a statement today.

Russia’s currency has depreciated 38 percent against the dollar since June and volatility has soared to the highest since the country defaulted on local-currency debt 16 years ago, stoking concern that Russian lenders’ asset quality has deteriorated. Russian banks’ willingness to lend to each other is declining. The Mosprime overnight rate hit 27.3 percent on Dec. 18, the highest since Bloomberg started compiling the data in 2006, the report said.

“It’s 100 percent sure that more banks will be rescued because there is an acute shortage of liquidity, ” said Maxim Osadchy, head of analysis at BKF Bank in Moscow. “The interbank market has practically come to a halt because of a lack of trust and the central bank is afraid of giving more rubles to banks so they don’t buy more dollars with them.”

While the cost of short-term cash usually follows the central bank’s benchmark rate closely, the overnight rate remains at 24.6 percent. Policymakers raised the key rate 6.5 percentage points to 17 percent on Dec. 16 to shore up the ruble amid an exodus of capital from Russia, Bloomberg said.

Trust, once part of exiled former oil tycoon Mikhail Khodorkovsky’s business empire and later advertised in Russia by actor Bruce Willis, didn’t respond to phone calls or e-mails seeking comment from its press office.

The central bank has found a capital hole of tens of billions of rubles at Trust, deputy governor Mikhail Sukhov said, according to Interfax. The rescued bank lost more than 3 billion rubles in retail deposits last week, he said. The central bank’s press service later confirmed his comments.

Meanwhile, Khodorkovsky was quoted in an AlJazeera feature article on members of Russian feminist protest band Pussy Riot, who are using their international fame to set up projects for the improvement of Russia’s penal system.

Perhaps the most important thing those projects achieve is to keep the public informed about individual cases, and Khodorkovsky, Russia’s best-known political prisoner, knows about the necessity of such public awareness, the report said,

“If an inmate is forgotten, anything can happen to him, ” the former oil tycoon said in October while addressing Norwegian rights activists, according to a video posted on his website.

Russia’s penal system is an unwanted home to some 700, 000 men and women, the world’s largest per capita prison population after the U.S., AlJazeera said.

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