08.11 Russia’s Economic Development Minister Calls for New Subsidized Loans for Russian Banks

Updated 4:48 p.m. Moscow Time

BEIJING, November 8 (RIA Novosti) - The Russian economic development minister has urged the country's sovereign wealth fund to disburse subsidized loans to national banks to help them finance the Russian economy.

"I think it is a good idea to use money from the National Wealth Fund as a basis for funding commercial banking operations so that our biggest lenders could get subsidized loans and, in their turn, give loans to such companies as [Russian crude producer] Rosneft and so on," Economic Development Minister Alexei Ulyukayev said on Saturday.

"It will be a win-win situation. [The National Wealth Fund] will make a good client and provide a predictable asset to the banks, reasonable loans on acceptable internal market conditions to companies, while the NWF will be able to make a transparent investment into a subsidized [financial] instrument. It could be carried out via NWF, or directly, or there can be other opportunities," Ulyukayev said on the margins of the Asia-Pacific Economic Cooperation (APEC) summit in Beijing, China.

The Russian National Wealth Fund (NWF) is Russia's state-owned sovereign wealth fund investing in real and financial assets.

Speaking about the size of possible loans, Ulyukayev said they could be earmarked to match the needs of each particular bank and their capitalization goals. He added both state-owned and commercial banks could be eligible for NWF funds.

"I believe that banks need this kind of support simply because they need to boost their capitalization. We need to boost capitalization of the banking system by introducing changes to the dividend policy: the fewer dividends there are the stronger capitalization is; through the conversion of existing subordinate units into joint stock, through the mechanism of subsidized loans…" the minister said.

He added however that companies experienced no acute need for this type of funding. "I would rather give direct support to banks, but not to companies," Ulyukayev noted.

This comes as Russia is trying to curb the impact of Western economic following its alleged involvement in the Ukrainian crisis. The restrictions target its banking, oil and defense sectors. Specifically, they banned Russian banks from looking for long-term loans on US and European capital markets.