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Russia may initiate a banking bailout more far-reaching than measures taken by the United States over fears that bad loans could paralyse the economy, the Financial Times reported on its website on Thursday.
Russian Deputy Prime Minister Igor Shuvalov will meet a group of experts on Friday to discuss ways to recapitalise the banking system and will consider taking stakes in troubled banks, according to draft proposals the FT said it had seen.
The proposal, one of those being considered according to the FT, the government would issue OFZ treasury bonds to boost the balance sheets of the biggest banks with the state taking preferred shares in return.
The measure would see the government taking board seats and having veto rights at the bailed-out banks.
Russia's central bank has said the banking system may need 500 billion roubles ($16.05 billion) of extra capital should non-performing loans climb to 10-12 percent from around 4 percent now.
The chairman of Russia's central bank said this week bad loans and stagnation on credit markets were one of the biggest problems for the economy.
Shuvalov told Reuters Financial Television on Tuesday that Russia would support only 100-150 banks from its 1,100-plus banking system but the government did not expect bad loans to exceed 10 percent of their total credit portfolio.
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Some experts predict the bad loans ratio could rise to as high as 20 percent by 2010, wiping out all profits in the banking sector and further stalling lending to the economy which is facing its first recession in a decade.
Shuvalov said the government had enough reserves to help key banks withstand a rise of bad loans to 10 percent.
Russia's largest lender, state controlled Sberbank, will clear the bulk of current bad loan provisions within 3-4 years, Chief Executive German Gref told a shareholder meeting Friday.
"In three to four years we can get back most of the provisions for bad loans, in part by selling off collateral," Gref said.
Central bank chief Sergei Ignatyev, speaking at the same meeting, said chances that the country would face a second wave of banking crisis were "negligible".
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