MOSCOW, January 17 (RIA Novosti) - Russia is facing the threat of a banking crisis in the next three or four years, the director of the Institute of Transitional Economy said Tuesday. Yegor Gaidar, a former prime minister who conducted liberal economic reforms in Russia in the early 1990s, said the threat of a banking crisis in the next three or four years was a major challenge for the Russian economy.
According to Gaidar, the country's monetary authorities understand the threat and are taking certain steps to avoid it, but the risks of a crisis still exist.
Gaidar said the risks to the banking sector "were high and progressing." There were also rising risks related to the provision of large loans by state banks to government corporations, Gaidar said.
At the same time, Gaidar pointed to the growth of consumer and small business lending as a positive sign. He said this trend would continue to develop.
Gaidar said the risks related to competition between foreign and domestic banks were relatively low. "The emergence of foreign banks on the retail lending market could create real competition and will have a positive effect on the development of the banking sector," Gaidar said.
At the same time, the economist said the situation in Russia could deteriorate in 2008-2010. "Accumulated short-term reserves enables the government to control the situation calmly in the next two or three years. The situation closer to 2008-2010 is riskier," Gaidar said.
According to the economist, in 2001 the economy would have reacted calmly to a steep fall in the oil price. But he said that Russia had since built up its budget obligations to such an extent that there would be grave consequences for the budget, the balance of payments and the national currency, even if crude plummeted to $25/bbl - less than 50% of recent prices, but well above the long-term average oil price.
Gaidar said it would be advisable to set the cut-off level, above which revenues from oil exports are saved into the Stabilization Fund, at $20/bbl barrel. But that would be a tough political decision to take, he said. The current cut-off point is $27/bbl
