MOSCOW: The Russian government has approved injecting 239bn rubles ($6.6bn) into two of the country’s largest, state-controlled banks that have been hit with Western sanctions.
VTB Bank will get the lion’s share of the funds, 214bn rubles, while Rosselkhozbank will get 25bn, according to a decree signed last week and posted on Monday on the government website.
Both banks were hit by sanctions imposed over Moscow’s support for pro-Russian rebels in Ukraine that deny them most access to borrow on Western financial markets.
The banks will issue new preferred shares that will be acquired by Russia’s National Welfare Fund, a sovereign wealth fund fed by the country’s massive oil revenues worth $86.5bn at the beginning of August.
The borrowing restrictions crimp the ability of Russian banks to lend just as flagging domestic demand has choked off growth and the government wants domestic companies to step up investment to reduce reliance on the West.
Russia has banned most EU and US food products in response to Western sanctions, which officials said means the farm sector will need nearly $18 billion in additional investment to produce more of the country’s food.
The Vedomosti business daily reported yesterday that the Russian government was considering creating a state reinsurance company, another sector in which the country is highly dependent on foreign companies.
It quoted a finance ministry source as saying that creating such a company would require at least $1.5bn to begin with, while the financial magazine Dengi estimated the sector as needing $10bn in capital to replace foreign companies.
AFP
