MOSCOW (Reuters) – Russia’s prime minister and finance minister have called on the country’s largest public lenders to ensure that liquidity continues to flow to banks in Belarus, where a political crisis has increased tensions over the financial sector, banking sources said.
The high-level instructions are another sign of Moscow’s support for beleaguered Belarusian leader Alexander Lukashenko, who has faced weeks of protests following the disputed August 9 elections.
The unrest triggered deposit outflows from Belarusian banks and increased demand for foreign currency, pushing the local ruble to record highs PARN = and the erosion of the central bank’s already scarce hard currency reserves.
Two banking sources told Reuters that Russian Prime Minister Mikhail Mishoustine and Finance Minister Anton Siluanov asked senior Sberbank executives SBER.MM, VTB VTBR.MM and VEB, all with units in Belarus, to ensure the continuous flow of Russian rubles to the neighboring state.
“Mishoustine and Siluanov called on state banks to ask (them) not to close (interbank) limits on Belarusian banks, so that they can maintain access to liquidity in rubles,” the first source said. . The second source confirmed the calls.
The move also coincides with fears that Belarusian banks will be forced to restrict operations if interbank lending stops. The sources said the Russian government wanted to avoid a Ukrainian-style scenario in which Russian lenders would be forced to make large write-offs on their Ukrainian units after 2017.
This came after Kiev imposed sanctions on several Russian state banks, following the annexation of Crimea by the Kremlin in 2014 and its alleged role in fomenting conflict in eastern China. Ukraine.
“There have been a lot of losses with Ukraine, but Belarus is another story,” said a third source, a senior banker at a Russian state lender.
In Belarus, fears are high for Belgazprombank, a subsidiary of the Russian bank Gazprombank GZPRI.MM, which has been placed under provisional administration by the central bank. Its leader Viktor Babariko was jailed after trying to challenge President Alexander Lukashenko in the elections.
Lukashenko denies electoral fraud.
Russia’s finance ministry and a spokesperson for Mishoustine did not respond to requests for comment. Sberbank declined to comment while VEB said it had not revised the daily interbank funding lines for its unit in Belarus.
VTB said it had not revised its funding lines with Belarus and its unit there.
Chart: Belarus IIF dollarization and foreign exchange reserves –
RUSSIA TO THE RESCUE
Moscow’s support will be crucial. Russian loans already represent 47% of Belarus’ external financing, estimates the rating agency Fitch, the rest coming from Europe and China.
Fitch Ratings Senior Director Olga Ignatieva estimates Belarusian banks owe their Russian counterparts $ 2.0-2.5 billion through interbank loans.
In a recent memo, Fitch predicted that Belarusian banks would retain access to parent banks “and, selectively, to funding from Russian banks in the latter part of 2020”.
Belarus’s financial sector, made up of 24 banks, is nearly 80 percent state-controlled, with customer funds making up the bulk of liquidity, according to central bank data. European and Kazakh banks are also present in Belarus in addition to Russian and state lenders.
Hard currency deposits make up about 60% of bank accounts, but as demand for foreign currency increases, the central bank is limited in its ability to act as a lender of last resort, the Institute for International Finance noted.
Belarus’ central bank declined to comment.
Additional reporting by Karin Strohecker and Tom Arnold in LONDON and Darya Korsunskaya in MOSCOW; Written by Katya Golubkova; Editing by Sujata Rao and Catherine Evans