Central Bank officials announced, on 25 March, that it would help banks affected by bad debt, if they faced losing their profits for 2009.

The Central Bank’s Alexei Simanovsky says the banks may have to make provisions totaling $45 billion if bad debt rose to 10% of credit. Which would lead to the Central Bank to help ‘bad banks’ through recapitalisation in the form of more flexible accounting rules or new subordinated loans.

Banks took profits of 400 billion roubles in 2008, but profits could be lost completely for 2009 if bad loans rise to 10%, says Simanovsky.

However, a more positive view was taken by the First Deputy Chairman of the Central Bank, Gennady Melikyan, who said banks could withstand bad loans at 10%, and added that the rise in bad debt at the end of 2008/beginning of 2009 is not indicative of the expected performance for the rest of the year. He stated, “the overdue loans showed the fastest growth in January − up 20-22 percent, but their share in the whole credit portfolio is low…Bad loans are rising fast, but those forecasts provided now, in my opinion, are exaggerated.”