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re: Update pg 23: Russia,IMO, will default on its sovereign debt within six months
Posted on 12/19/14 at 9:23 am to LSURussian
Posted on 12/19/14 at 9:23 am to LSURussian
Can you esplain what this means for us fiscally challenged?
Posted on 12/19/14 at 9:35 am to LSUGrrrl
It means the Russian parliament acknowledges Russia's biggest banks are bankrupt, meaning they have no capital, because their liabilities (what they owe) exceeds their assets (what they own).
It's a stop gap measure to make it look like their banks are not going to fail. The purpose is to try and reassure depositors to not pull their money out of Russian banks.
IOW, it's an attempt to prevent what is commonly known as "runs" on the bank. (See the movie "It's a Wonderful Life" when all the depositors show up at the Bailey Building and Loan to withdraw their deposits. )
But in the case of Russia, it's the large corporate depositors and other banks who are afraid their money deposited in Russia's biggest banks might be lost forever if the big banks fail.
As a sign of how desperate some banks are to get cash, one bank today paid over 38% interest to borrow from the Russian Treasury Department just to get cash for 10 days. (In a sign of the magnitude of the cash shortage, one bank paid 38.3 percent today to take the entire 150 billion rubles ($2.5 billion) of 10-day deposits auctioned by the Treasury. )
In one of my earlier posts from a month of so ago, I predicted this would happen.
It's a stop gap measure to make it look like their banks are not going to fail. The purpose is to try and reassure depositors to not pull their money out of Russian banks.
IOW, it's an attempt to prevent what is commonly known as "runs" on the bank. (See the movie "It's a Wonderful Life" when all the depositors show up at the Bailey Building and Loan to withdraw their deposits. )
But in the case of Russia, it's the large corporate depositors and other banks who are afraid their money deposited in Russia's biggest banks might be lost forever if the big banks fail.
As a sign of how desperate some banks are to get cash, one bank today paid over 38% interest to borrow from the Russian Treasury Department just to get cash for 10 days. (In a sign of the magnitude of the cash shortage, one bank paid 38.3 percent today to take the entire 150 billion rubles ($2.5 billion) of 10-day deposits auctioned by the Treasury. )
In one of my earlier posts from a month of so ago, I predicted this would happen.
This post was edited on 12/21/14 at 10:22 am
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