By Gleb Bryanski
MOSCOW, June 27 (Reuters) - Russian Prime Minister Vladimir Putin asked the central bank on Saturday to lend money directly to regional banks in the first measure to emerge from the government's brainstorm on how to handle the credit crunch.
Despite a commodity price rally the Russian economy continues to contract, and gross domestic product is expected to shrink by up to 9 percent in 2009. Most economists blame the credit crunch.
'During my meetings with regional leaders they often say the central bank should work with regional banks more actively and boldly,' Putin said at a meeting with Bank of Russia Chairman Sergei Ignatyev.
'They say such work would help break through financial bottlenecks,' Putin said, adding many regional banks had guarantees from regional governments.
Banks not rated by international agencies currently have access only to short-term loans.
Ignatyev, confirmed for a third term this week, told Putin there were still no signs the banks had resumed lending despite the central bank's recent rate cuts. Economists see the crunch as a key challenge for the government in the short term.
'June figures, although preliminary, do not show the lending growth has resumed,' Ignatyev said, according to a transcript of the meeting published on the government's website.
'We should start the guarantees mechanism as soon as possible,' Ignatyev said. President Dmitry Medvedev said in May the plan to help companies through a system of state guarantees had been a failure.
Against falling domestic demand commercial banks see risks in key sectors of the economy such as manufacturing, construction and trade, which drove Russia's economic growth in recent years, as too high, setting prohibitive interest rates.
AFRAID TO LEND
The regional leaders, whose budgets depend on corporate profit tax and personal income tax, most affected by the crisis, openly complain that credit committees in large banks block loans to manufacturing, construction and retail firms.
Business lobbies initially blamed the central bank for keeping artificially high interest rates but statistics cited by Ignatyev suggested the situation had not changed significantly after three 50 basis points rate cuts.
'Banks are afraid to lend to real sectors due to, among other things, high credit risks. If in the end of last year I thought the main problem was lack of resources, today banks have enough resources,' Ignatyev said.
Ignatyev said that in another sign of the credit crunch commercial banks were actively redeeming loans taken earlier from the central bank through uncollateralised loan auctions, the main channel for providing liquidity.
Ignatyev told Putin he did not see growth in non-performing loans, also cited as one of the reasons for the credit crunch, as 'catastrophic'.
'It is a normal process, which takes place during such crisis. The fact it has slowed is already good news,' Ignatyev said.
The government's anti-crisis commission headed by First Deputy Prime Minister Igor Shuvalov met experts on Friday to discuss measures to resume lending without ruining the banking sector through an increase in non-performing loans.
Putin told Ignatyev the current scheme where the central bank's money was first channelled to large Moscow-based banks and then went to regional banks 'created problems' and the change 'would significantly improve the situation'.
'We need to take additional steps so that banking sector stabilisation can lead to stabilisation in the real sector,' Putin said. The government also has a plan to capitalise banks with special treasury bonds.
(Editing by Sue Thomas) Keywords: RUSSIA PUTIN/LOANS (gleb.bryanski@reuters.com ; +7 495 775 1242; Reuters Messaging: gleb.bryanski.reuters.com@reuters.net ) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
MOSCOW, June 27 (Reuters) - Russian Prime Minister Vladimir Putin asked the central bank on Saturday to lend money directly to regional banks in the first measure to emerge from the government's brainstorm on how to handle the credit crunch.
Despite a commodity price rally the Russian economy continues to contract, and gross domestic product is expected to shrink by up to 9 percent in 2009. Most economists blame the credit crunch.
'During my meetings with regional leaders they often say the central bank should work with regional banks more actively and boldly,' Putin said at a meeting with Bank of Russia Chairman Sergei Ignatyev.
'They say such work would help break through financial bottlenecks,' Putin said, adding many regional banks had guarantees from regional governments.
Banks not rated by international agencies currently have access only to short-term loans.
Ignatyev, confirmed for a third term this week, told Putin there were still no signs the banks had resumed lending despite the central bank's recent rate cuts. Economists see the crunch as a key challenge for the government in the short term.
'June figures, although preliminary, do not show the lending growth has resumed,' Ignatyev said, according to a transcript of the meeting published on the government's website.
'We should start the guarantees mechanism as soon as possible,' Ignatyev said. President Dmitry Medvedev said in May the plan to help companies through a system of state guarantees had been a failure.
Against falling domestic demand commercial banks see risks in key sectors of the economy such as manufacturing, construction and trade, which drove Russia's economic growth in recent years, as too high, setting prohibitive interest rates.
AFRAID TO LEND
The regional leaders, whose budgets depend on corporate profit tax and personal income tax, most affected by the crisis, openly complain that credit committees in large banks block loans to manufacturing, construction and retail firms.
Business lobbies initially blamed the central bank for keeping artificially high interest rates but statistics cited by Ignatyev suggested the situation had not changed significantly after three 50 basis points rate cuts.
'Banks are afraid to lend to real sectors due to, among other things, high credit risks. If in the end of last year I thought the main problem was lack of resources, today banks have enough resources,' Ignatyev said.
Ignatyev said that in another sign of the credit crunch commercial banks were actively redeeming loans taken earlier from the central bank through uncollateralised loan auctions, the main channel for providing liquidity.
Ignatyev told Putin he did not see growth in non-performing loans, also cited as one of the reasons for the credit crunch, as 'catastrophic'.
'It is a normal process, which takes place during such crisis. The fact it has slowed is already good news,' Ignatyev said.
The government's anti-crisis commission headed by First Deputy Prime Minister Igor Shuvalov met experts on Friday to discuss measures to resume lending without ruining the banking sector through an increase in non-performing loans.
Putin told Ignatyev the current scheme where the central bank's money was first channelled to large Moscow-based banks and then went to regional banks 'created problems' and the change 'would significantly improve the situation'.
'We need to take additional steps so that banking sector stabilisation can lead to stabilisation in the real sector,' Putin said. The government also has a plan to capitalise banks with special treasury bonds.
(Editing by Sue Thomas) Keywords: RUSSIA PUTIN/LOANS (gleb.bryanski@reuters.com ; +7 495 775 1242; Reuters Messaging: gleb.bryanski.reuters.com@reuters.net ) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.