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8 Oct, 2007 12:58

Liquidity crunch still only an echo in Russia

The global liquidity crisis is putting Russia’s banking sector in the spotlight. Analysts say volatility in credit markets is starting to have some minor effects on the country’s banking sector, but say that so far it’s holding up well. But they are warni

The resonance of the global financial crisis, which started in the U.S. mortgage market, is reaching Russia.

Market watchers say Russia is facing a liquidity squeeze for the first time since the global sub prime crisis broke out.

Russia’s Central Bank joined the efforts to ease fears over the global liquidity crunch, injecting about $US 1.6 BLN into the country’s banking system.

Some analysts say Russia is likely to withstand the turmoil on global financial markets. The reasons are the relatively low leveraging of Russian companies and the high oil prices, which have helped fuel an economic boom.

Currently, the international crisis is having little effect on the domestic banking sector, with credit loan growth continuing despite some smaller players being reported as cutting back some operations.

But analysts see some longer term implications and effects.

The comparative insulation of Russia’s economy and strong reliance oil revenues mean that some of the worst effects of the global liquidity crisis are yet to be felt.  Despite this, the country’s reliance on international capital and its integration into the world economy mean that a continuing liquidity crisis will bring about changes, which need to be managed.