The Central Bank's program to jump-start Russia's paralyzed banking system already has opened the way for some banks to pay their debts, a bank official said Saturday.
Reviving commercial bank activities is one of the priorities Russia's new prime minister, Yevgeny Primakov, has set to help bring an end to the nation's economic.In the past month, Russia's currency has been devalued, the country has defaulted on its loans and it has changed governments. Primakov, who was confirmed by parliament on Sept. 11, has yet to name his entire Cabinet.
Commercial banks have been brought to the brink of bankruptcy, and their virtual shutdown for the past two weeks has brought other commercial activities to a standstill.
The Central Bank started Friday helping banks clear their debts to one another by allowing them to use reserves stored in the Central Bank to pay their liabilities. Commercial banks are required to keep some of their reserves in the Central Bank.
Andrei Kozlov, first deputy chairman of the Central Bank, said the program had been successful so far, the Interfax news agency reported. He said it had gone particularly well in St. Petersburg, Samara and Yekaterinburg - though the vast majority of banks are concentrated in Moscow.
The Central Bank has also promised to buy government bonds held by the commercial banks at prices much higher than their actual market value. The move is intended to help banks so they can begin paying debts and getting money back into the economy.
The Central Bank's plans are expected to involve the printing of billions of new rubles, which almost certainly will contribute to inflation. Consumer prices have already begun to soar after being kept under control for more than a year.