Russia's banks protected from sub-prime fallout

The Central Bank has pumped an extra $US 12 billion into Russia's banking system in the biggest ever injection of liquidity. It’s a sign that Russian banks are still suffering from the collapse in global lending.

Tom Mundy from Renaissance Capital says the CBR has done what it promised to do to help Russia overcome the effects of the sub-prime mortgage crisis.

“The Central Bank is merely doing what it said it would do at the beginning of the sub-prime fallout which is to provide liquidity whenever it’s needed and that’s backed up by the finance ministry,” says Tom Mundy, equity strategist of Renaissance Capital Group.

The Central Bank is in a strong position to provide this liquidity, reporting on Thursday that its reserves are at an all-time high.

The bank's foreign currency and gold reserves increased by nearly $US 4 billion last week alone.

The Finance Ministry says the reserves are set to keep rising as the CBR withdraws money from circulation, to guard against increasing inflationary pressure, caused by rising capital inflows.