Russia’s payment of rubles on twodollar bonds has been identified as a potential default by the Credit Derivatives Determination Committee. The committee that US banks belong to Goldman Sachs Group Inc and JPMorgan and Britain’s Barclays said the potential bankruptcy occurred on April 4, when Russia paid off two bonds totaling rubles instead of dollars two billion dollars. Moscow responded by announcing legal action that it was forced to pay in rubles because of the freezing of its current accounts with foreign banks. However, Russia could avoid a default if it manages to pay in dollars before the 30day grace period expires, i.e. within the next May 4th.
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Russia on the way to a controlled default. But Moscow warns: “Legal action against those who prevent us from paying regularly”
In a testament to the country’s complicated financial situation, the Central Bank of Russia announced today that Russian families withdrew the equivalent of foreign currency from their accounts in March. $9.8 billion. Banks cut new business loans by about a third. The Central Bank of Russia said western sanctions had scared account holders. “The quarter was difficult, at certain moments the situation seemed critical, but then we went towards one stabilization phase‘ he explained Alexander Danilov, director of the central bank’s banking regulation and analysis department, according to Reuters news agency. “The banking sector faced a significant outflow of funds at the end of February,” he said. “People were withdrawing money from their accounts Panic, out of fear for their safety.”
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The Central Bank of Russia cuts interest rates. “Risks to the economy are falling and inflation is slowing”
The funds deposited with the banks are decreased by 1.2 trillion rubles, equal to $14.7 billion, in February and the decline continued in March with outflows of 236 billion rubles. In March, consumer credit fell 1.9%, also on the back of the central bank’s decision to hike interest rates to curb capital flight and support the rouble, but this is leading to lending. The central bank has more than doubled its interest rate by raising it 20% on February 28th four days after the invasion and in connection with the first wave of sanctions. Then, on April 8, the rate was lowered to 17%. A further reduction is expected at the next board meeting on April 29.
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