The Bank of Russia will issue uncollateralized loans

On October 10, 2008, the State Duma of RF passed an act, which allows the Bank of Russia to issue uncollateralized loans to national commercial banks. The loans have become available to credit institutions that have a credit rating not lower than a pre-set level for the term of no longer than 6 months. Procedures and conditions of such loans are to be set by CBR’s own acts.

This measure is aimed at supporting the national banking sector that has found itself in a hard situation due to a large-scale capital flight out of Russia driven by the global financial crisis.

Up to now the Bank of Russia could extend loans to the national commercial banks against securities, foreign exchange, an incorporeal right under loan agreements or a credit institution’s bail. However, with their considerable need in credit resources the banks might lack assets that might serve as collateral. In the circumstances, the CBR strives to bolster stability of the national banking system.

Meanwhile, it should be noted that such credits should be made available only in the case of a genuine emergency, so that not to give rise to negative incentives for banks to undertake excessive risks on the one hand, and to avoid an excessively rapid growth of money supply and inflation acceleration in the country, on the other.

P. Trounin, Head of the monetary and credit policy division