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Capital Flight Frightens Russian Banks
November 30, 2010 16:27

The Russian Finance Ministery predicted a capital flight by the end of 2010 year. Now it's obvious that these predictions come true. In September and October capital flows increased and experts are trying to find out the reason for this phenomenon. At the same time the future privatization will hardly be able to help resuming the flow of foreign capital investments.

"Everyone is concerned but nobody knows anything", — says Oleg Vyugin, head of the MDM bank. He understands the anxiety of Russian financial structures becouse of the sudden outflow of capitals. "Over the past ten month this index rose up to 21 billion dollars — this index is much more higher than initial estimates", — says the head of the Central Bank Sergey Ignatiev. About 8 billion dollars from this amount flowed out of the country in September and October.

"I would say this is probably a good sign — the majority of these transefrs are investments of Russian companies to the foreign companies", said Zdenek Tureck, head of Citybank in Russia, during the Financial Forum. To explain this trend many evidence-based hypotheses could be put forward. In particular, one of the reasons is the implication of subsidiaries in other countries and repayment of the external debt. Russian companies made a lot of purchases of investments abroad and this gesture requires the transfer of funds. "The capital flight is much more appreciable because of the current deterioration of accountability", — comments on Natalya Orlova, chief economist of Alhpa Bank. The other explanations look like rumours — thus, it is said that the ex-mayor Yuri Luzhkov and his wife had sold a lot of assets in order to transfer their funds to the Western Europe.

The chief economist of Sberbank Ksenia Yudaeva appoints the recession of the foreign investment as the main problem that appears at the moment. From January to September the recession exceeded 17% over the same period of the last year. Thus, the total sum exceeded eight billion dollars. "It's not obvious, that the program privatization, announced by the government will attrack many foreign funds. The authority is planning to sell its participation in many companies and at the same time they it is planned to maintain its presense in the capital for the first time to keep the control", — reports Yudaeva. As for her, Ksenia stands for the total privatization of the Sberbank (and not for less than 8% selling of the capitals as it is provided by the government).

In general, Moscow plans to gain about 32 billion dollars with the program of three years privatization. "Sberbank and another bank VTB as well as the oil company Roneft alreay present on the exchanges. And why should the government should maintain its involvment?" — says Oleg Vyugin, who is skeptical about the goverment's wishes to carry out the privatization of 100% capital of the companies.

Moreover, the capital outflow from Russia is expected in 2011-2012 as well. According to the chief economist of the Development Center, only in the subsequent years the situation will change.

Tags: Russian banks Sberbank Russian finance   

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