BANKING & FINANCE - Aug. 29, 1995

Russian Banks Face Crisis of Confidence: Money flowed back into nervous Russian markets after a three-day credit crunch, but banks were still wary of offering new loans and economists said a crisis of confidence had moved to the top of the agenda. The liquidity crisis hit financial markets last Thursday after most of Russia’s 2,500 banks stopped lending money to one another on fears they would never get the credits back. The central bank stepped in to ease the crunch Friday, offering big banks short-term loans and pumping money into the banking system by buying government securities. But economists said that action did not get to the root of the problems. Russia still has too many banks, many are short of capital or have bad portfolios, and the mechanism to supervise banks has yet to be worked out in full.