Russia Offers Dollar Loans to Aid Banks Before Debt Payments

Russia’s central bank is seeking to make it easier to get foreign-currency refinancing as $120 billion of debt payments loom next year after the ruble’s collapse.

The Bank of Russia will offer banks four-week and one-year funding in dollars and euros, backed by foreign-currency loans to large exporters, according to a statement today. The instrument will be available to banks with equity of at least 100 billion rubles ($1.8 billion) until 2018.

Russian companies have struggled to raise financing abroad after U.S. and European Union sanctions over the conflict in Ukraine curbed access to capital markets and pushed the economy to the verge of recession. With about one-fifth of the central bank’s reserves spent in the fight to shore up the ruble, Russia may lose its investment-grade credit-rating for the first time in a decade, according to Standard & Poor’s.

“The central bank may extend around $25 billion under this instrument while the sanctions last,” Oleg Kouzmin, an economist for Russia at Renaissance Capital in Moscow, said by phone. “Essentially the central bank is replacing interventions,” he said, referring to the foreign-currency purchases that have cut into its international reserves.

Unsatisfied Demand

The Bank of Russia hasn’t satisfied demand for foreign-currency liquidity with loans under repurchase agreements for as long as one year. The value of the collateral required for those operations -- mostly ruble-denominated bonds -- plunged along with the local currency and government bonds.

“The repo didn’t have much success,” Kouzmin said. Banks aren’t ready to part with securities they may use for ruble refinancing to borrow in dollars and euros, he said.

The new loans will help the ruble to return to “fundamentally justified levels” and balance foreign-currency supply and demand, lowering volatility, the central bank said in its statement.

The ruble, which has lost almost 30 percent against the dollar in the past three months, is the worst performer among more than 170 currencies tracked by Bloomberg. It strengthened 0.7 percent to 54.110 as of 6:20 p.m. in Moscow.

“Companies won’t have to buy the currency on the market and pressure the ruble rate,” Kouzmin said.

The central bank has been taking steps to aid banks as Russian lenders and companies face an estimated $120 billion of foreign-currency debt coming due next year. Last week, the central bank allowed banks to use a third-quarter exchange-rate to value risk-weighted assets and pledged to boost liquidity, while the government has pushed exporters to sell foreign-currency earnings to support the ruble.

While the Bank of Russia is keeping the total foreign-currency refinancing limit available to banks at $50 billion, it’s ready to increase the level as necessary, according to the statement.

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