Putin orders better management of national financial reserves

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President Vladimir Putin ordered the government on Monday to draft proposals on improving the management of Russia's financial reserves.
MOSCOW, March 3 (RIA Novosti) - President Vladimir Putin ordered the government on Monday to draft proposals on improving the management of Russia's financial reserves.

"Given the situation on global markets, I ask you to prepare proposals on optimizing the management of the country's financial reserves - the Reserve Fund, National Welfare Fund, and gold and currency reserves," Putin told a government session.

"No revolution in this sphere is being planned, but we have to respond to what is happening in the global economy... We have to create a set of instruments for long-term refinancing of the banking system," he said.

Russia's economy has emerged largely unscathed from global stock market downturns provoked by the U.S. subprime mortgage crisis.

However, a senior Russian Central Bank official admitted in late February that the bank had U.S. subprime mortgage bonds in its investment portfolio, and said that losses had been suffered following last November's credit crunch, but did not give exact figures.

Central Bank First Deputy Chairman Sergei Ulyukayev later backtracked on his statement saying no losses were sustained, but analysts were skeptical over the denial.

The two largest U.S. mortgage lenders, the Federal National Mortgage Association and the Federal Home Mortgage Corporation, in whose securities the Russian Central Bank invested funds, reported record $3.56 billion and $1.5 billion Q4 losses respectively.

The companies are authorized to make loans and provide loan guarantees, but their securities carry no government repayment guarantees.

Russia's Finance Ministry said on January 30 it had divided the Stabilization Fund, set up to accrue surplus revenue from high world oil prices, into the Reserve Fund and the National Welfare Fund.

The Stabilization Fund held 3.852 trillion rubles ($157 billion) as of January 30.

Following the reform, the Reserve Fund, designed to cushion the federal budget in the event of an oil price plunge, totaled 3.082 trillion rubles ($128.3 billion) just after its formation, while the National Welfare Fund, expected to help Russia carry through pension reforms, held 777.03 billion rubles ($32.4 billion).

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