According to Reuters, the Central Bank of Russia (CBR) said on Wednesday it would slash banks' reserve requirements. Reserve requirements for liabilities towards foreign banks will be cut to 4.5% from 8.5%, on rouble deposits to 1.5% from 5.5% and on other liabilities to 2% from 6%. According to our estimates this measure will inject approximately RUB 250 bn of liquidity into the system, while the CBR chief Ignatev calls for RUB 300 bn of funds to reach the banking sector.

 

The measures are effective from tomorrow meaning that the Russian money market is likely to feel a certain relief. At the same time, trading at MICEX is suspended tomorrow, which implies that most types of REPO operations will be unavailable for the local banks. Hopefully, suspension of REPO operations will break the wave of margin calls, which hit the market so hard during the last few days.