RIA Novosti: Geopolitics Poses Risks to Russian Financial Stability – Bank of Russia

MOSCOW, April 2 (RIA Novosti) – A review of ratings of Russian borrowers and the threat of their exclusion from international capital markets may affect Russia’s financial stability, the head of the Central Bank of Russia said Wednesday.

“The geopolitical risks are large, especially if our banks and companies run into limitations on refinancing in Western markets, and a review of forecasts of ratings may negatively impact [Russia’s] financial stability,” Elvira Nabiullina was quoted by Prime business news agency as saying during a meeting of banking officials.

The fate of Crimea, formerly an autonomous republic within Ukraine and Russia’s newest region since last month, has sparked the greatest geopolitical showdown between Russia and the West since the end of the Cold War. Dozens of Russian officials and several banks have been hit by punitive sanctions levied by Washington and Brussels in response to the reunification of Crimea with Russia.

Finance Minister Anton Siluanov said last week Russia will support banks and businesses with large external debts in the event of a financial crisis by dipping into an $88 billion emergency sovereign wealth fund. Economic Development Minister Alexei Ulyukayev said Russian authorities may take a number of steps to increase the capitalization of the country’s banking system if the economic situation worsens due to Western sanctions.

“The Bank of Russia is now looking at how we should react, including granting liquidity,” Nabiullina said.

The capital outflow in 2014 will exceed the central bank’s forecast which stands at $20 billion, she said. “The estimates of the capital outflow for the first quarter will soon be released but it is clear now that they will significantly exceed the initial basic forecast for this year,” she said.

Russian presidential aide Andrei Belousov said last week capital flight from Russia could reach some $100 billion in 2014.

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