The agency said "a series of adverse shocks and mounting pressures in the banking sector have tilted risks more to the downside" but widespread downgrades of Russian banks are not anticipated at present.
Russia's benchmark RTS and MICEX indexes plunged Tuesday nearly 11.5% and 17.45%, respectively, the largest one-day falls since the 1998 financial crisis. The stock and currency exchanges suspended trading at 12:10 Moscow time (08:10 GMT) Wednesday following instructions from a federal regulator.
"An unpalatable cocktail of heightened global financial turbulence, falling oil prices, the war in Georgia and corporate governance concerns has dented investor sentiment towards Russia and increased pressure on the banking sector," said Ed Parker, head of Emerging Europe in Fitch's Sovereigns team. "Nevertheless, the Russian sovereign's strong balance sheet underpins its 'BBB+' rating and gives it the capacity to provide support to the banking sector."
The agency said aggressive borrowing in recent years has seen the Russian private sector's external debt rise to $436 billion at the end of March, from $109 billion at the end of 2004, increasing its exposure to global capital markets and international investor sentiment.
Russia's Finance Ministry announced an array of measures Wednesday to inject liquidity into the banking sector as Russian exchanges suspended trading after stocks plummeted amid an ongoing global credit crisis.
The ministry said it would increase lending and extend deposit terms for major banks as markets have been unsettled by the fallout from the mortgage crisis in the United States and the collapse of investment bank Lehman Brothers.
The Central Bank raised the margin for its repo transactions for a third day in a row Wednesday to a new high of 430 billion rubles ($16.8 billion). On Tuesday, the bank injected 361 billion rubles ($14.2 billion) and a further 365 billion rubles the following day at its twice-daily repo auctions.
"Government support to banks underscores that the sector is a contingent liability to the sovereign," Fitch said.
It said it would not necessarily view the use of the sovereign wealth funds (SWFs) to help stabilize the banking sector "as warranting negative rating action if moderate in size and limited in scope."
However, it said it "would look unfavorably on attempts to prop up the equity market or an open-ended or substantive commitment of public resources to the banking sector that significantly weakens the sovereign balance sheet."
The agency said it "expects Russia to run a general government budget surplus and current account surplus of around 6% of GDP in 2008, buoyed by high average annual oil prices."