Rouble dives as debt swap agreed
Wednesday 26 August 1998
Dealings on Russia's foreign exchange markets had to be suspended at one stage under local circuit-breaker provisions. It was the currency's biggest one-day fall for four years.
The deal announced last night will involve the swapping of holdings in one and two-year GKO and OFZ bills for three, four and five-year rouble- denominated bonds. The three-year bonds will carry a coupon of 30 per cent, with the coupon on the longer-dated bonds falling by 5 per cent a year from then on.
Investors will also be offered 2006 dollar-denominated bonds with a 5 per cent coupon. Those taking rouble bonds are to be offered a cash kicker worth 5 per cent of their holding.
Western bankers welcomed the fact that on a key point of principle - that foreigners should receive equal treatment with Russian nationals - Moscow has caved in to foreign pressure. However, there was concern at restrictions imposed to prevent the bonds being dumped on the open market for dollars once the debt swap is completed next week.
Traders said local banks were taking advantage of the attempts by the central bank to pump in liquidity to dump the currency wholesale in favour of dollars.
"It is getting more crazy. It is getting out of control," said David Riley at Fitch IBCA, the debt rating agency. "The idea was to have an orderly devaluation. But this is nothing of the sort."
In the midst of the crisis, three of Russia's largest banks - Menatep, Uneximbank and Most Bank - yesterday revealed that they were to merge.
The deal is likely to be followed by others as Russia's poorly capitalised banking system struggles to cope with the aftermath of last week's devaluation. Estimates suggested that the amount owed by Russian private sector banks to foreign counterparties could be as high as $38bn, if off-balance sheet deals are taken into account.
Russia's central bank chief, Sergei Dubinin, seemed increasingly caught between his desire to maintain monetary discipline and his fear that unless further liquidity was pumped into the system, some of the larger banks would go to the wall and with them bring down what is left of Russia's shaky financial system.
- 1 Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
- 2 People all over the world are getting semicolon tattoos to draw attention to mental health
- 3 Van driver who comforted Clark Carlisle and called 999 after suicide attempt dies age 24
- 4 James Blunt was special guest on the highest-rating Top Gear episode ever
- 5 The biggest first date turnoff has been revealed
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
Sickness and disability benefits could be reduced by £30 a week as part of £12bn welfare cuts
iJobs Money & Business
£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...
£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...
£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...