First came a $US 20-billion injection into the interbank lending market on Tuesday to improve borrowing rates. Then, on Wednesday the Finance Ministry put up a further $44 billion for the country's three largest banks - Sberbank, VTB, and Gazprmobank - in a bid to boost banking-sector liquidity.
Yet nothing seems to calm the markets. They crashed to new lows on Wednesday before trading was suspended for the day, just after midday. Sergey Guriev, Head of the New Economic School, says it's too early to judge the success of the liquidity injection.
"Right now we'll see what Sberbank, VTB and Gapzrombank do with the cash. But if they do support the interbank market the market can actually pick up and most banks will do reasonably well and survive."
But some, including KPMG Russia CEO and Chairman, Roger Munnings, believe the potential failure of some banks may actually benefit the sector.
"I think standing back and looking at it from a macro level, it's a good thing for the system. I think consolidation, increasing the size of banks, increased ease of regulation, of course, with fewer banks, is a good thing for the system," said Munnings.
So what would ease the crisis of confidence? Guriev explains that the market is looking for liquidity in the short term, but over the longer term has different needs.
"The market wants both lower taxes and more liquidity injected by the government. I think in the short run it is crucial to inject cash, for liquidity. In the longer run, markets would be very happy to see that the government is reducing taxes. Now, in the very long run, that means that Russia is still further away from resolving pension system problem, because the Russian pension system is unbalanced in the long run," said Guriev.
Overnight bank-to-bank rates eased slightly on Wednesday, to around 10 per cent from Tuesday's peaks of 11 per cent. That's still double the levels of early August.
More cause for concern
While governments and Central banks around the world continue to try and pump money into financial system, liquidity is continuing to dry up.
The London Interbank Offered Rate, or LIBOR, the rate at which banks lend to each other, doubled to almost 7 per cent - a cost they will pass on to large corporate borrowers.
Daniel Klein, investment advisor with Hellevig, Klein & Usov, says this is a bad piece of news: "In Russia commercial real estate developers who have loans are also tied to the LIBOR rate, and the fact that the borrowers have to borrow an extra 4 per cent may really bring major havoc between consumers."
The cost of borrowing in euros has risen to its highest since 2000. Even though the Federal Reserve is trying to rescue the world's biggest insurer AIG, investors are worrying about which financial firm will be next to head towards extinction.
But some financial markets analysts doubt that will work.
"Investing government money in the stock market is an extremely dangerous temptation. However, the authorities are likely to give in to that temptation. I think that the least dangerous solution would be pumping it into some kind of commercial banks pool designed to maintain the bank system liquidity," believes Evgeny Evstigneev, a professor at Moscow School of Economics.
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