Russian banks ask for key rate cut

MOSCOW – Russia's banks appealed to the country's central bank on Monday for a reduction in the key rate to 15 percent, with a further gradual reduction toward the pre-crisis level. The current rate has been 17.5 percent since 16 December.

Deputy chairman of the State Duma Committee on Financial Markets and president of the Association of Regional Banks Anatoly Aksakov has described the current financial situation as “dire.”

"Despite some stabilization in the foreign exchange market and the expected inflow of tax and budgetary resources, banks are experiencing an acute shortage of liquidity," Aksakov told Russian media outlet Izvestia.

According to Aksakov, banks in Russia fear that the high interest rate is leading to a crisis of insolvency, and that the number of bankruptcies will increase if rates are not lowered.

The Russian central bank raised its key rate two times in less than a week last December. The second rate hike was accompanied by the ruble's record tumble on the market, losing 20 percent of its value in one day.

The ruble managed to regain a small part of its value by the end of the year, but as the price of oil continued its decline in early January the currency has again started to slide.

As of Monday morning, the ruble stood at 62.82 to the U.S. dollar and 74.56 to the euro.

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