Russians dash for their cash amid fears of a new banking collapse

Nervous Russians rushed to withdraw their savings yesterday as fears grew that leading banks were about to go under. Fearful of a repeat of 1998 when the banking sector collapsed leaving millions of people out of pocket, cash machines around the country were besieged.

Nervous Russians rushed to withdraw their savings yesterday as fears grew that leading banks were about to go under. Fearful of a repeat of 1998 when the banking sector collapsed leaving millions of people out of pocket, cash machines around the country were besieged.

On Tverskaya Ulitsa in central Moscow, long queues formed outside Sberbank with people withdrawing as much cash as they could, putting their cash card in again and again then scurrying off with briefcases full of banknotes.

Inside the branch, pensioners queued to exchange their rubles for dollars, worried that the mini banking crisis would hit the Russian currency's value and wipe out their savings at a stroke. Cash machines quickly ran out but most politicians continued to insist doggedly that there was no crisis.

"There is no banking crisis," the Finance Minister, Alexei Kudrin, said. "The banking system is in a normal state. What we see now is a reform process... and the fact that some banks cannot cope with that ... should not affect the whole system."

But his words appeared to carry little weight among a people painfully inured to government deception and failure. Most just shrugged their shoulders and rushed from bank to bank determined to get their hands on cash. "I just want my money back," said one frustrated man, standing by an empty cash machine. "God knows what's going to happen if I leave it in the bank."

Problems began in mid-May when the appropriately named Sodbiznesbank went out of business after it was accused of money-laundering. In June, another smallish bank shut, then a medium-sized bank, Dialog-Optim, stopped taking deposits.

The manner of their closure was undignified and unsettling. In each case, customers would arrive at their branch to find a handwritten note announcing that the bank was suspending operations "temporarily" and they should ring such and such a telephone number.

Rumours quickly began to circulate that there was a "black list" of banks earmarked for closure and the government began to speak about the need for consolidation.

When Guta Bank, one of the country's top 25 financial institutions, closed to depositors last week, people began to get seriously worried. It is about to be swallowed by the state-owned Vneshtorgbank in a desperate attempt to maintain consumer confidence. But it was when the country's largest private bank, Alfa Bank, admitted it had problems that the word crisis began to be used.

Alfa Bank insists its future is secure but its actions appear panic-driven. Nervous about the amount of cash being taken out of its coffers ($60m [£40m] was withdrawn last Wednesday alone, more than six times the normal level) it has moved to impose a punitive 10 per cent commission on early withdrawals. Peter Aven, its president, has gloomily predicted that $700m could be withdrawn before the crisis is over and that it could take a month to get back to normal.

The bank said yesterday that its shareholders are ready to inject $1.2bn to calm the situation but that it saw no need to do so for the time being.

But the effect of the crisis on Alfa Bank appears to have been crucial psychologically. One of its biggest shareholders is Mikhail Fridman, Russia's sixth wealthiest man with a fortune of $5.2bn, and a man whose name is usually associated with success not failure.

"I think the problems [in the Russian banking sector] are mainly psychological," Sergei Ignatiev, the chairman of the Central Bank, said yesterday. And Andrei Illarionov, President Vladimir Putin's quirky economics adviser, has done little to calm frayed nerves.

"It's obvious that it is a banking crisis," he told the Interfax news agency. "A situation where the expression 'banking crisis' is forbidden is absurd and ludicrous, because solving a problem begins with correctly identifying it."

Developments concerning Yukos, Russia's largest private oil company, have hardly helped matters. Bailiffs moved in to collect an unpaid tax bill for $3.4bn yesterday as the government continued to insist there was no crisis, and panic was easing.