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FACTBOX-How Russian authorities are dealing with crisis

Published 12/02/2008, 10:04 AM
Updated 12/02/2008, 10:06 AM
TTEF
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MOSCOW, Dec 2 (Reuters) - Russia has pledged over $200 billion from budget funds and its oil wealth cash pile to help cushion the economy from a sharp slowdown and to kick-start its financial markets.

So far, the crisis has seen companies cut jobs, salaries and investment plans, forced consolidation in Russia's 1,000-plus banking sector and prompted a rise in corporate debt defaults.

Following is a summary of measures announced so far.

CORPORATE DEBT

-- Companies to get $50 billion from Russia's gold and forex reserves to help refinance foreign debt, with money distributed by state entity VEB. Demand has exceeded supply, and officials have said it is possible the cash pot will be increased.

-- The money is available to companies working in the real economy and strategic sectors, which had borrowed to fund investment projects or asset purchases within Russia, and the aid will be linked to capital investment programmes.

FISCAL MEASURES

-- Profit tax to be cut to 20 percent from 24, while a new depreciation mechanism will allow firms to cut tax bills further

-- Shares held for over a year exempt from profit tax, further plans to liberalise taxation of securities market

-- Further tax cuts for oil and gas sector due to be announced this year and implemented from 2010

-- A three-month extension for quarterly valued added tax (VAT) payments -- usually a big drain on banking sector liquidity -- introduced from October

-- Government allowed to redistribute funds between different areas of next year's budget as needed

STOCK PURCHASES

-- Pledge of 350 billion roubles ($12.53 billion) of budget funds for buying shares and corporate bonds to support and stabilise the market, split between this year and next

-- Purchases via VEB started in October, with the focus on highly-rated, liquid companies

BANKING SYSTEM SUPPORT MEASURES

-- Pledge of 950 billion roubles ($36 billion) from the budget and Russia's oil wealth funds in subordinated loans for the banking sector, with 500 billion of that going directly to state-owned lending major Sberbank and the rest put on deposit at VEB to be distributed to other banks

-- Introduction of collateral-free loans given out by the central bank to commercial banks, with a total of up to 3.5 trillion roubles up for grabs via auctions, for periods of up to one year. The loans are designed to replace and supplement the budget cash previously deposited at commercial banks by the Finance Ministry and are available to banks which have suitable ratings from Russian or international ratings agencies

-- Central bank statement that it can offer up to 1 trillion roubles a day in its twice-daily repo auctions

-- Major banks to be partially compensated for any losses sustained as a result of lending money on the interbank market

-- Three major banks -- state-run Sberbank and VTB, plus Gazprombank, the banking arm of Gazprom -- will lend 60 billion roubles to stock market participants, effectively offering de-facto state support for troubled brokerages

-- Access to central bank's refinancing increased to banks classed as having problems, and authorities are discussing the possibility of also including investment firms

-- Lombard list of collateral accepted for refinancing via the central bank widened by lowering required ratings and allowing the inclusion of mortgage-backed securities

-- Bank deposit guarantees increased to 100 percent of the first 700,000 roubles, equal to around 40 average monthly wages

ROUBLE

-- Central bank has been regularly intervening in the currency market, spending $57.5 billion in September-October to support the rouble. Since Nov. 11 it has allowed the rouble to weaken in three 1 percent steps versus a euro-dollar basket in what analysts see as a gradual depreciation policy.

-- Commercial banks urged not to increase their net foreign currency longs, nor foreign currency denominated assets until the year-end, with compliance taken into account when distributing the central bank's collateral-free loans

-- Daily limit -- sometimes as low as zero -- set on currency swap operations with the central bank as of Oct. 20. Rate on the rouble part of the overnight currency swap raised to 13 percent, to deter speculators

-- Rate on the rouble part of overnight currency swaps raised to 10 percent, in a move which analysts say should help discourage speculators from betting on rouble weakness

-- Introduced euro and dollar deposit accounts for commercial banks at the central bank to limit capital flight

RESERVE REQUIREMENTS

-- Banks' reserve requirements slashed to 0.5 percent across the board, representing cuts of between 5 and 8 percentage points since September, depending on the type of liabilities. The cuts are estimated to free up around 370 billion roubles

-- Increased the coefficient used for collateral accepted by the central bank

INTEREST RATES

-- Cut interest rates on some of the less popular tools to encourage banks to use them and re-introduced 90-day repo operations which had been cancelled in the spring.

-- Raised key rates, taking the refinancing rate to 13 percent, in a bid to discourage capital flight and boost the appeal of the rouble

MARKETS

-- Former central bank deputy chairman Konstantin Korishchenko appointed head of MICEX exchange

-- Stocks trading halted on numerous occasions in recent weeks, to the consternation of some market participants

-- Trading suspension rules changed several times, with the latest rules prescribing a one-hour trading halt if technical indexes rise by more than 10 percent or fall by more than 5 percent. A rise of over 20 percent or a fall over 10 percent mean a suspension until the end of the following trading day

-- MICEX exchange widened parameters for daily rouble moves versus euro or dollar to +/- 1.75 percent and has increased the requirements for advance deposits on currency trades

REAL ECONOMY

-- Real estate purchases by the state to support construction sector

-- VEB will earmark 30 billion roubles to support small and medium-sized enterprises

POLITICS

-- An extension of presidential term to six years from current four and parliament term to five years from current four to boost political stability

-- A promise of parliament seats to smaller parties which did not pass the seven percent threshold currently needed to get seats in the Duma lower house of parliament

- An increase in unemployment benefit, tax breaks for home buyers

ADDITIONAL MEASURES UNDER REVIEW

-- President Dmitry Medvedev said the central bank should loosen requirements for collateral on loans issued by commercial banks to enterprises or change valuation technique to enable banks to lend more

-- Subsidised rates on loans to "real economy" sectors

-- Financial help to Russian regions from the federal budget after a review in Jan-Feb. (Compiled by Toni Vorobyova and Gleb Bryanski; editing by Stephen Nisbet)

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