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13.10.08
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The State Horn Of Abundance
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By Dmitry Babich
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One stabilization measure comes hot on the heels of another, as television and other government-controlled media avoid using words like “collapse” or even “financial crisis,” preferring more soothing “decrease in activity” or “pessimistic expectations.” On Friday, members of the State Duma, the lower chamber of the Russian parliament, devoted all day to protecting the small investors’ rights. In the morning, the deputies passed a draft bill which increased the maximum bank deposit to be fully insured from 100 thousand rubles ($3,800) to 200 thousand ($7,600). Deposits exceeding 200 thousand rubles were supposed to be insured at the level of 90 percent. Deposits exceeding 700 thousand were not supposed to be guaranteed.
But the rapidly changing situation on the financial markets is breeding miracles. At noon, the Duma members adopted another draft bill, which extends a 100-percent insurance guarantee on deposits worth up to 700 thousand rubles. Those investors who have bigger amounts of money in their deposits will get 700 thousand rubles from the Agency on Deposits’ Insurance (ASV).
The Prime Minister Vladimir Putin praised the deputies for their initiative, which somehow happened to coincide with his own ideas aired during an occasional interview. In Putin’s words, “The parliamentarians have revealed a responsible approach, they quickly adopt the decisions suggested by the government and aimed at preventing the dangers stemming from the global financial markets.”
According to the estimates of ASV’s Deputy General Director Andrei Melnikov, the new law protects 98 percent of private deposit accounts in banks. “The payments of up to 700 thousand rubles is the maximum of what the agency (ASV) can offer without risking the stability of the insurance fund,” Melnikov said. “Right now, Russian banks hold six thousand billion rubles ($229 billion), about half of this money is kept in Sberbank. The increase of the insured amount to 700 thousand rubles must reassure the population.”
“The authorities understand that the developments on the global markets are probably just the tip of the iceberg, and try to nip the investors’ panic in the bud,” the Vremya Novostei daily commented on the Duma’s move.
In another move aimed at reassuring investors, this time the big ones, Putin said that the state would buy 175 billion rubles worth of Russian companies’ bonds and securities before the end of the year. The move is supposed to support the Russian stock market, which went into freefall several times during the last month. The International Monetary Fund warned Russia against artificially supporting the stock market, and Putin’s own finance minister Alexey Kudrin just recently said that the state would not protect any company’s stocks. But the premier decided otherwise, and so far none of his ideas went unheeded by the parliament or President Dmitry Medvedev.
The chief analyst of Deutsche Bank Moscow Yaroslav Lisovolik said that there was nothing special about these moves. “All over the world, the state gets more and more often involved in the financial side of the economic activity, this happens even in more economically developed countries than Russia,” Lisovolik said. “The economists of Deutsche Bank even predict a sort of return to Keynsianism – a macroeconomic theory based on the understanding of the need of the state’s regulatory activity in the economy.” |
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