Rouble dives as debt swap agreed

THE RUSSIAN government last night unveiled its long-awaited terms for a key restructuring of $40bn in short-term government debt, after a day of nerve-jangling confusion which saw the rouble crash 10 per cent against the dollar to 7.88.

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.

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power