Russia shuts down market

http://money.cnn.com/2008/09/18/news/international/russia_ma...

MOSCOW (AP) -- Russia's finance minister said trading on Russian exchanges won't resume until Friday, as the government tried to stem the dizzying plummet in share prices and restore confidence in the economy.

ITAR-Tass and Interfax quoted Finance Minister Alexei Kudrin also as saying that Russia's three largest banks will be getting an extra 60 billion rubles ($2.36 billion) to help bolster the financial markets.

The move comes a day after financial regulators halted trading on the MICEX and RTS exchanges as Russian stocks plummeted to their lowest points in nearly three years. MICEX opened for limited trading on Thursday, but RTS remained closed.

In a statement, MICEX officials called the situation in Russian markets "extraordinary." The Kremlin has struggled to restore confidence in the banking system with a wave of emergency loans, fearing a repeat of the 1998 economic crisis, which saw the ruble devalued, default on the country's sovereign debt, and widespread bank foreclosures.

Russia's situation is markedly different now -- the government has huge cash reserves to bail out banks and defend the ruble and virtually no debt.

But analysts still warn that that disaster could loom if officials mishandle the turmoil.

Following emergency talks, Central Bank officials on Thursday announced new additional measures to ease the strain on banks, which are facing a liquidity squeeze amid a crisis of confidence between lenders.

The bank said it would slash the amount banks are legally required to set aside as reserves by 4 percentage points, freeing up 300 billion rubles ($11.8 billion).

Central Bank chairman Sergei Ignatiev called on lenders to respond sensibly to the new measures. "We hope that banks will spend these funds not on long-term crediting or other kinds of crediting of clients," he said, "but on the maintenance of the necessary volume of their liquidity and on making settlements."