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Uncle Wally
21-10-2014, 18:33
Russia Banks $32 Billion Buffer to Help Pay Debt Amid Crunch

Russia’s biggest banks, facing a dollar shortage amid sanctions, have a $32 billion buffer to meet short-term foreign-debt payments, the central bank said.

“For the banking sector as a whole, the problem of refinancing external debt is not of a systemic nature,” the Bank of Russia said after conducting a poll of the 30 largest lenders in September. “Individual banks may face a shortage of foreign liquidity due to a mismatch in timing between assets and liabilities.”

Companies and banks in the world’s largest energy exporter have been grappling with a funding squeeze after U.S. and European Union penalties over the conflict in Ukraine limited their access to international debt markets. That pushed the premium to swap rubles into dollars to record levels this month and helped send the local currency to successive record lows.

The liquid foreign currency-denominated assets of the 30 largest Russian lenders exceeds their liabilities this quarter and in 2015 by $32 billion, the Russian central bank said in a financial stability report, published on the website. Some 70 percent of the banks’ total $192 billion of external debt is denominated in dollars, according to the report.

Under the central bank’s base-case scenario, in which sanctions are lifted in the second half of next year, Russian companies and banks will pay their external debts unassisted. If penalties last longer, lenders will need to refinance domestically using the central bank’s foreign-currency operations during peak periods, it said.

The Bank of Russia plans to offer the equivalent of as much as $50 billion via foreign-exchange repurchase loans through the end of 2016 to alleviate the funding squeeze, it said on Oct. 16. The nation’s foreign currency and gold reserves stood at $451.7 billion at Oct. 10.

http://www.bloomberg.com/news/2014-10-21/russia-banks-32-billion-buffer-to-help-pay-debt-amid-crunch-1-.html?cmpid=yhoo

Armoured
22-10-2014, 14:47
Thanks Wally. I've actually been struggling to understand what this means, since the statements are put fairly carefully - I think to avoid saying anything wrong and scaring anyone. Well done, CBR.

But I don't think it means much. It refers specifically only to the _foreign_ debt payments and talks about it as if this is only an issue for banks. (Not to mention that the statement carefully mentions 'individual banks may have issues' and is a bit like the RUssian line about average temperature of patients in a hospital not being a good indicator of average health.)

Anyway: this statement carefully avoids the issue of _domestic_ forex debt. Say, for example, Rosneft has tens of billions of dollars of deposits with State-Owned Bank (SOB).

SOB keeps that forex cash it gets from Rosneft somewhere. And SOB has its own pending forex bonds to pay off. Net-net, it has a surplus that technically corresponds to what the CBR said.

The problem is that the oil and gas companies have their own debts coming due - which is why they're holding some cash. I saw a figure estimating these short-term payments at ~40-50 billion. And the oilcos' net cash deposits at about half that.

From a systemic perspective ('the economy'), it doesn't matter whether the forex to be paid comes out of the banks directly, or the oilcos directly, or the oilcos withdrawing their cash from the banks, or whatever combination thereof. Any way around, there will be fewer dollars/euros, and lots of companies trying to find them. In short, a forex liquidity squeeze.

Concentrating just on the banks neatly sidesteps that issue for public consumption, but doesn't change much: the government or CBR will one way or another have to step in and plug those gaps.

They have the money, but there's a risk they'll lose some of it, and money used for this can't be used for other things.

Of course, oil price changes might make things better.

Or worse.

[Caveat lector. Just working thorugh this stuff myself.]

annasophia
22-10-2014, 15:22
Altogether, I think Russia is in a far better position long term than are the western politicos trying to crush it.

I know we had a thread here recently about investments and the Wall street stock markets and money gained and lost in the last quarter and last year.

But this is very short term thinking and humans have been around for a long time now.

Criticize me if you will, but the Russians are invested for the long term. Be they Czars or communists or Putin or whatever comes next, Russia has been Russia and exactly like Russia for 1,000 years. Russia is a survivor.

Russia has tremendous natural resources, vast land, great wealth, a long history, and a fairly homogenous people.

The west on the other hand has much less to boast of. Europe is divvied up into a boatload of small different countries with different languages and habits and traditions and 1,000 years or so of internal warfare to boast of. Low on natural resources these days and with a high population density.

The US is an unproven entity being only a few hundred years old. They've blown their wad in the 20th century, have no kind of community roots, and are strip mining the wealth of the land and the people for everything that can be extracted in the short term. America's greatest treasure is its fantastic ability to produce beau coup food on a very fine agricultural landscape. This too is being squandered on an enormous scale.

So all in all, I think the tip is to Russia for the win in the long term.

Yaks
23-10-2014, 02:06
The Russian government or "Russia" can probably survive anything just as the Iranian government can. But Russia is a country that pays peanuts to doctors and teachers, most of the hospitals outside of Moscow look like the third world and roads are just awful. Nothing is being spent unless you have an oligargh living at the end of your street. And I think one of the differences is that Russians don't expect much to change, they are used to low expectations. Western countries are the opposite and expect a great deal from their leaders and politicians and demand more and more each year-and trying to please them is a difficult task that few achieve.

Uncle Wally
23-10-2014, 13:31
The Russian government or "Russia" can probably survive anything just as the Iranian government can. But Russia is a country that pays peanuts to doctors and teachers, most of the hospitals outside of Moscow look like the third world and roads are just awful. Nothing is being spent unless you have an oligargh living at the end of your street. And I think one of the differences is that Russians don't expect much to change, they are used to low expectations. Western countries are the opposite and expect a great deal from their leaders and politicians and demand more and more each year-and trying to please them is a difficult task that few achieve.

It's also a country that is not 17 trillion dollars in debt. Where is that going to lead to?

AstarD
23-10-2014, 13:37
It's also a country that is not 17 trillion dollars in debt. Where is that going to lead to?

27295

Uncle Wally
24-10-2014, 00:24
Armored you thanked that post? So you know were it ends? You tell us print money, no gold, do you have any children? You see where it leads and yet you still support the destructive way America wants us to live? And you think I am idiotic?

Armoured
24-10-2014, 08:27
Armored you thanked that post? So you know were it ends? You tell us print money, no gold, do you have any children? You see where it leads and yet you still support the destructive way America wants us to live? And you think I am idiotic?

I think you have no sense of irony: I thought it was funny as not serious.