30 Jul 2009 17:03

Russian govt could allocate extra funds for bank capitalization if needed

MOSCOW. July 30 (Interfax) - The Russian government could allocate additional funds for the capitalization of banks if the need arises, Deputy Prime Minister and Finance Minister Alexei Kudrin told journalists on Thursday.

"An analysis is currently being made of the situation with banks' balance sheets. Some elements of control and oversight will be fortified. And if there is a need to expand some instruments, of course, the government will pass such decisions. We have the resources," he said when asked about the possibility of additional funds being allocated to provide banks with subordinated loans via Vnesheconombank (VEB).

Kudrin said no decisions on this issue were made at meetings held on Thursday with the prime minister, the budget commission and other government members.

"Of course, if there are active appeals for subordinated loans, this money will quickly run out," he said. At present, the limit for the amount of funds VEB can take from the National Welfare Fund for subordinated loans to banks is 410 billion rubles and half of this amount has already been used. VEB Chairman Vladimir Dmitriev said recently that the potential deficit of funds amounts to about 80 billion rubles based on banks' requests for loans.

Decisions on whether to issue subordinated loans need to be made in a more weighted manner, Kudrin said, noting that this is not the sole instrument for capitalizing banks. The Finance Ministry is planning to issue Federal Loan Bonds (OFZ) in exchange for preferred bank shares and also enter the bank capital market directly, he said. As an example, he cited VTB Bank , which is planning to issue additional shares with the government buying a large part of the shares. In this way, there is a balance between instruments used to capitalize banks, he said.