Russia » Economics

Guta Bank saves itself and Russia from crisis

Poor Russians who possess bank accounts spent the entire last week running around in an attempt to retrieve their monetary deposits.

Government authorities in turn were trying to persuade the crowd that there was nothing terrible going on in the financial sphere and that the situation was highly exaggerated. People however continued to storm financial establishments. Afterwards, however, when government authorities managed to resolve problems with one of the major problem-causing banks, the overall public rush started to decline. Now, the government can claim on legal ground that there was no bank crisis in Russia whatsoever.

As it was promised earlier by head of the Russian Central Bank (CB) Sergei Ignatiev, Guta-Bank will soon be acquired by the government’s “VneshTorgBank” (VTB). It was made official this past Friday that VTB has purchased 86% of Guta-Bank shares. It was also reported that the Central bank will finance the deal while placing $700 million USD in “VneshTorgBank” at almost no interest. The press release also mentioned that the deal “will enable Guta Bank to function normally”. Basically, the government will take all the responsibility for the bank's activity.

The other day, president of VTB Andrei Kostin declared that Russian government along with the bank's supervisory board can approve the decision regarding the Guta Bank purchase as early as this week. According to him, starting Monday “VneshTorgBank” is capable of fully restoring Guta's normal activity.

Guta Bank started experiencing problems in the end of June, when crowds of alarmed clients started to withdraw their deposits. The bank lost more than 10 billion rubles. As a result, on July 6th “Guta” had to stop issuing payments. This in turn only ignited the situation and the panic among people worsened. The bank’s leadership addressed “VneshTorgBank” with an offer to receive a multimillion bank credit on the security of industrial assets of the group. VTB however declined such proposition. Negotiations would have hit a dead end if it wasn't for the Central bank. It did not take long for Central Bank to prepare special anti-crisis program.

Bank officials refused to provide details regarding the “rescuing” of Guta. They promised to do so during a special press-conference which is scheduled to take place later today.

Undoubtedly, the “Guta” purchase in its current state is quite advantageous for VTB. Aside from acquiring the entire Guta clientele, it will also get $700 million USD from Central Bank (at almost no interest).

Minister of Finance Alexei Kudrin states that the acquisition of Guta Bank appears to be of great interest to “VneshTorgBank” from a commercial point of view. “I am absolutely certain that of Guta Bank investors will be protected,” considers he. In this regard, mentioned he, the government is interested in signing the documents in the nearest future.

Yulia Vernik