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UPDATE 1-Russia eyes reserve requirements to battle inflows

Published 12/03/2009, 09:09 AM
Updated 12/03/2009, 09:15 AM

* C.banker says move may become necessary

* Banking sector situation improving

* Problems still possible, state should be ready to act

(Adds details)

By Oksana Kobzeva

MOSCOW, Dec 3 (Reuters) - Russia may raise reserve requirements in a bid to limit the inflow of speculative capital, central bank's first deputy chairman Gennady Melikyan, told Reuters.

Russia is considering various "soft" measures to discourage an inflow of cash from investors keen to cash in on high oil prices, as well as to make it less attractive for Russian banks and companies to borrow heavily abroad.

One possible measure already mentioned by officials is increasing reserve requirements for banks' foreign currency liabilities, making them higher than those for rouble debt and thus increasing the cost of external borrowing for banks.

"It may become necessary to use the reserve requirements mechanism for regulating speculative capital. For now I do not see a sharp need for this, but it could materialise," said Melikyan, who specialises in banking sector supervision.

"We need to look for some mechanisms of fine-tuning."

Melikyan, also a member of the central bank's board of directors, added that the situation in Russia's banking sector -- hard hit by rising bad loans amid a recession -- had improved.

"But it is too soon to remove from consideration possible difficulties, and the state should be ready at any moment to intervene in the situation if necessary," he said, broadly echoing the tone of other officials.

Russian Prime Minister Vladimir Putin said on Thursday that the country had passed the worst of the crisis but that recovery will require "time, strength and no little funds". (Writing by Toni Vorobyova; Editing by Victoria Main) ((antonina.vorobyova@reuters.com; Tel: +7495 7751242, Reuters Messaging: antonina.vorobyova.reuters.com@reuters.net))

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