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Central Bank to give $50 bln to bolster Russia's financial system

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The Russian Central Bank will grant state-controlled Vnesheconombank $50 billion from the country's international reserves to support the financial system, a deputy economic development minister said Monday.
MOSCOW, September 29 (RIA Novosti) - The Russian Central Bank will grant state-controlled Vnesheconombank $50 billion from the country's international reserves to support the financial system, a deputy economic development minister said Monday.

"The $50 billion will come from hard currency and gold reserves," Andrei Klepach said.

He said most of the funds would go out in loans to Russian companies to pay down their debt to foreign creditors, adding that total corporate debt stood at $300 billion.

Prime Minister Vladimir Putin said earlier Monday that Vnesheconombank would disburse up to $50 billion to Russian banks and financial institutions to help them meet their foreign liabilities.

"The Central Bank will deposit the funds with Vnesheconombank matching the amount of loans granted," Putin said.

Vnesheconombank, the Bank for Development and Foreign Economic Affairs, was established by the Russian government last year as a national development vehicle to modernize and diversify the Russian economy and make it more competitive.

Putin said Russian companies had encountered problems in getting loan extensions or obtaining new loans as global financial woes caused by the U.S. mortgage crisis and banking defaults persisted.

Russian stocks nose dived on September 17 to their lowest point in nearly three years, putting on hold trading on the RTS and MICEX exchanges for two days in a row.

The market rebounded on September 19 after the government scrambled to inject billions of dollars into the financial sector to shore up liquidity.

Putin said Vnesheconombank should lend to Russian banks at market rates.

He also said the government would allocate 75 billion rubles ($3 billion) from the 2008 federal budget to augment Vnesheconombank's capital.

Finance Minister Alexei Kudrin earlier said the government could opt to buy back stock of Russian companies, including those with government interest, if they remained undervalued, spending up to 500 billion rubles ($20 billion).

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