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The Ministry of Finance and the Central Bank of Russia (CBR) recently declared that they are working out measures for stabilizing the state securities market. The corner stone of the plan is to reduce governmental debt. Currently, officials plan to reduc e the internal debt by increasing the external. Minister Zadornov has said that he is sure that state securities will grow and that profitability will begin to decrease in the near future, probably beginning the following week.
This past week did not look so optimistic. The profitability of state governmental bonds (GKO) reached 44.96% interest p.a. 379 transactions with a total turnover of 66.92 million "new" rubles, were registered this past week at the Asian Pacific Interban k Currency Exchange (APICE); quotations of bills are available at http://www.apicex.pacific.ru/veksel.htm. (Page 4)
After the recent increase of the re-financing rate to 42% interest p.a., banks began to increase the rates for credits, although the rates on personal deposits have not increased considerably. If the average increase in the rates of personal deposits doe s not increase 5%, the rate of interest on banking loans is expected to fluctuate between 47% and 49% interest p.a. The large gap between the rates is the result of payments which banks are required to make to the CBR's Compulsory Reserve Foundation, as well as their own reservation funds, Deputy Chair of the ONEKSIM bank Ekaterina Voronova said. By increasing the bank rates and the compulsory reservation standard, the government has shifted its problems to the real sector of the economy. The rise in ra tes has made banking credits hard-to-reach for industrial producers.
A special "detecting" group has been created by the Krai Duma to investigate the circumstances of the bankruptcy of the Primorsky Food Foundation. The group is associated with Cherepkov's party, "Our City", which is why a discussion of the question on a Krai Duma session has been threatened with a political scandal. Delegate Leonid Beltyukov, the initiator of the investigation, has already declared that Governor Nazdratenko is the main culprit in the bankruptcy of the Foundation's pyramid.
A new bank is to be opened on Sakhalin this spring. The bank will be established by the Oblast administration, the ONEKSIM bank and the European Bank of Reconstruction and Development in order to develop the most promising projects of the island. It is e xpected that the capital of the bank will total $6-10 million, with ONEKSIM holding 35% and the EBRD 20% of capital shares. The Oblast administration will control 35%.
A table of rates of interest on personal deposits in hard currency provided by Vladivostok banks, is on Page 6. In spite of affirmations by the government on the stability of the economy, Russians continue to make their savings purchasing foreign currenc y. According to official statistics, people spent 21.6% of their income, or 349.6 trillion rubles, to purchase hard currency in 1997, compared to 18.9% of their income in 1996. Primorians alone spent 5.1 trillion rubles, or 22.6% of their incomes, purcha sing hard currency.
A delegation from EBRD and the National Bank of Alaska visited the Far Eastern Bank this past week. Sides have signed an agreement for the mutual establishment of correspondent accounts in the NBA and the FEB. This will allow quicker transactions betwee n Primorye and Alaska, as well as Sakhalin and Seattle where branches of the banks are located. This agreement was the first joint project between the three banks. Each of them has interest in the triangle between Alaska, the North Western part of the U SA and Vladivostok.
DalRybBank received a confirmation by the EBRD to provide a $1.5 million loan to the bank by the Dutch government for the completion of the "Twinning" project with the ING bank. (Page 6) In January, DalRybBank was awarded a prize and certificate from t he Scientific and Investigation Center of the European Council in Madrid, for achievements in international collaboration. This award allows the bank to take part in the European Council's programs on the development of tourism between countries and a wo rking out of the interbanking unified rules of financial trade.