Russian banks and companies seek government intervention on foreign debt

10 February 2009

Russian lenders plan to ask the government to renegotiate the $400-billion debt owed by them and and other local companies to European and other foreign banks, as they will find it difficult to repay in light of the current economic scenario. The debt will fall due for repayment in the next four years.

The euro slid by more than 1 per cent on reports that euro zone banks having substantial exposure in Russia due to the EU's economic ties, as edgy investors sold the euro on speculation that European banks may pile up heavy losses if Russian companies and banks default on their loans.

Japan's Nikkei business daily reported that the Russian government and some foreign banks like Deutsche Bank and HSBC have received a proposal by the Russian Association of Regional Banks to renegotiate the loans, although the Russian government has not commented on it so far.

According to Nikkei, the information on the proposal was made in an interview by Anatoly Aksakov, president of the group.

The report added that if the Russian government accepts the proposal, then it would initiate talks with the foreign banks and ask them to reschedule the loans with repayment guarantees being a part of the negotiations.

The ongoing financial crisis has seen Russian stocks taking a beating wherein the two main stock exchanges were closed down on a number of occasions and the rouble had been hammered by investors pulling out their money from Russia.