Russians have seen it all before; when the queues began to form outside banks that were refusing to pay out last month, panic began to set in.

A bank crisis that started in May with the closure of medium-sized Sodbiznesbank threatened to spin out of control after the large retail bank, Guta Bank, closed its doors and a run started on accounts at Alfa Bank, one of the two biggest commercial banks in Russia.

The Central Bank of Russia (CBR) exercised new money laundering laws in May and pulled the licence of Sodbiznesbank after it found more than $1bn of “suspicious transactions” during routine inspections. Prime Minister Mikhail Kasyanov said in June that bank reform is now “the top priority”.

Within weeks, another five banks were in trouble as Russia’s biggest banks cut credit lines to smaller peers and liquidity evaporated on the interbank market, a major source of capital for small banks. But when Guta Bank stopped trading at the start of July, the crisis threatened to become systematic and even the CBR got scared.

Media reports of problems at Alfa Bank a few days later started a run on its accounts as depositors withdrew $100m. Ironically, Alfa Bank was the only Russian retail bank to continue to pay out on demand during the height of the 1998 financial crisis.

To stem the outflow, Alfa extended its opening hours, imposed a 10% penalty on withdrawals and shareholders pumped $700m of extra cash into the bank.

For Russians that have lost their life savings three times in the last decade, it all looked very familiar, but analysts say that Guta was solvent and its problems had more to do with a CBR investigation into transactions by its parent company Gosinkor than bad banking practises.

“Guta was a special case,” said Andrew Keeley, a bank analyst with Renaissance Capital. “It was more a question of the owners deciding to let the bank go than any problems with the bank per se.”

The crisis reached its peak on July 8. Depositors turned to the safe haven of state-owned Sberbank and foreign-owned banks which received some of the $5bn withdrawn from accounts since May, about a tenth of all household deposits. However, Sberbank president Andrei Kazmin said that most depositors had turned to the only bank they really trust – their bed.

“There has been no surge of depositors with us. The data just does not confirm this — the clear winner here is the mattress bank,” Kazmin told the Russian daily Nezavisimaya Gazeta.

The CBR’s fast reaction to the burgeoning crisis managed to nip a meltdown in the bud. It cut the obligatory reserve requirements for a second time in a month – from 10% to 3.5% of liabilities – pumping over $3bn of extra liquidity into the sector. In the same week, the Duma rushed through the deposit insurance law.

The CBR will now guarantee the first Rb100,000 ($3,450) of deposits for all banks, including those banks that have collapsed since May.

And the CBR also pushed state-owned Vneshtorgbank, Russia’s number two bank by assets, into buying 86% of Guta with a CBR-guaranteed credit promising to make good on all Guta’s liabilities. Russia has survived the first bout with real banking reform, but more instability is on the cards.

“There will be more closures as reforms proceed,” said Keeley. “But the CBR will go more cautiously now as the strength of the reaction was a shock to everyone.”

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