Deglobalizing Russia
Deglobalizing Russia
- DECEMBER 16, 2015
- ARTICLE
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The Russian government, especially the Central Bank, has largely managed to preserve financial stability, a brief outbreak of panic in December 2014 notwithstanding. To offset the loss of access to Western financial markets, the Central Bank has relied on a new instrument—foreign currency repurchase agreements. In effect, the Central Bank has lent dollars to Russian banks that essentially posted their own dollar loans to Russian companies as collateral—and in turn used the dollars to repay their external debt. This has allowed Russia to stave off a run on the ruble as well as major defaults on Russian corporates’ dollar-denominated debt.
The government, for its part, looked into the issue of recapitalizing systemically important banks. This is a critical issue, as isolation is especially costly for the banking system. It is very likely that Russian banks—aside from Sberbank, which is run by Gref—will suffer losses in 2015. The Deposit Insurance Agency has already exhausted its funds and has asked the Central Bank for help.