The official view of Russia’s mid-summer problems in the banking system was that it was merely “a certain nervousness” in the markets. Latterly, the president of Sberbank was quoted as describing the situation as “a zone of turbulence”. However, by mid-August 10 banks had had their licences withdrawn by the Central Bank of Russia (CBR) and an 11th, Guta Bank, was the reluctant bride in an arranged marriage with Vneshtorgbank (see table).
A decline in the domestic securities market started in April, as a result of growing global emerging-market uncertainties and the effects of the ongoing Yukos saga, with Russian bond spreads widening by 100-200 basis points in the May to July period. Trading volumes in Russian municipal and corporate bonds also dropped by a factor of three in May, which knocked on into the tradable short-term debt market. These all had negative effects on the Russian banks’ liquidity and profitability.
