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SCMP Reporter

Several key financial institutions have revealed potentially damaging exposure to Russia which threatens to significantly impact their performance.

 Britain's Barclays Bank yesterday disclosed it had banking and net securities exposure of approximately GBP340 million (about HK$4.41 billion), through its investment banking arm, Barclays Capital.

 Nomura Securities said its British and United States units had incurred losses of US$350 million, while Salomon Smith Barney said it had about US$60 million of Russian-related credit losses.

 The revelations came as Russia's economic crisis deepened, with the little change in share prices - which had previously fallen sharply - as traders were unimpressed by a long-awaited summit between United States President Bill Clinton and Russian President Boris Yeltsin.

 Mr Yeltsin held 'intense discussions' with Mr Clinton and the Russian leader vowed there would be 'no retreat' from reforms, US Deputy Secretary of State Strobe Talbott said.

 Mr Clinton urged Mr Yeltsin to reverse capital flight from Russia, saying the country 'must stop and reverse flight of money out' of the country to lift itself from its economic crisis.

 A Russian spokesman said Mr Yeltsin pledged the country would not return to a centrally planned economy.

 Even so, Mr Yeltsin told Mr Clinton Russia could temporarily re-impose some state controls on the economy to overcome the crisis.

 Russia promised to improve tax collection and make other reforms in July in return for US$22.6 billion aid from the International Monetary Fund, the World Bank and Japan.

 The Russian Government used all but US$1 billion of its first US$4.8 billion aid instalment to buy roubles in a failed attempt to defend the value of its currency.

 Meanwhile, Russian police yesterday arrested outgoing first deputy finance minister Vladimir Petrov on suspicion of accepting a large bribe and illegally helping a commercial bank, Interfax reported, quoting the public prosecutor's office.

 The Itar-Tass news agency said Mr Petrov, 44, was arrested for allegedly accepting a bribe that 'benefited a financial bank'. News agencies did not report which bank was involved.

 The benchmark RTS Index rose slightly to close yesterday at 65.66, and the rouble was trading at 11.35, well below the official rate of 9.3301 to the US dollar.

 Yesterday, Barclays said that as a result of its Russian exposure, it expected to make a charge of about GBP250 million, and its profit for this year would be impacted by about GBP150 million.

 It also warned the situation in Russia in general had affected other areas of Barclays Capital's trading performance, and that during July and last month, Barclays Capital had lost about GBP75 million pre-tax, in addition to the direct consequences of its Russian exposure.

 'The situation within the country continues to be highly volatile,' Barclays said.

 Earlier this week, several other big financial institutions revealed their level of exposure to the collapsing Russian economy.

 Germany's largest bank, Deutsche Bank, said it had credit exposure of approximately 1.35 billion deutschemarks (about HK$5.93 billion), and held US$270 million in short-term trading positions in short-term Russian Government paper.

 Commerzbank said it had exposure of about one billion marks, of which 725 million marks was in Russian debt and 375 million marks in structured finance exposure. About 60 per cent of its Russian debt was covered by risk provisions.

 Dresdner Bank had covered about 60 per cent of its 680 million mark exposure.

 Yesterday, rumours emerged that the Moscow Interbank Currency Exchange (Micex) would be allowed to start trading tomorrow, which analysts said could produce a further sharp fall in the rouble.

 Last week, several US banks said they had built up large levels of exposure.

 JP Morgan said it had US$160 million of exposure, and BankBoston revealed US$10 million trading losses from Russia out of an overall US$30 million.

 Republic Bank of New York said losses on its Russian investments would force it to take a US$110 million charge in its third quarter, and BankAmerica said much of its US$220 million trading losses in the past quarter were caused by Russia.

 Among the large Swiss banks, United Bank of Switzerland said exposure was approximately 500 million Swiss francs (about HK$2.67 billion), and it had incurred book losses of 180 million Swiss francs.

 CS Group said global market difficulties - particularly in Russia - had cut this year's net profit of its investment bank, Credit Suisse First Boston.

 Bank Austria said it had Russian exposure of 12.6 billion schillings (about HK$7.9 billion), and had taken 4.2 billion schillings of provisions.

 Luxembourg-based private banking group Safra Republic said it was taking a US$65.9 million charge in its third quarter to reflect a sharp mark-down of its restructured Russian short-term debt portfolio.

 Dutch bank ABN Amro said it had lost 100 million guilders (about HK$389.3 million).

 The disclosures came as the Bank for International Settlements revealed in its International Banking and Financial Market Developments Report this week that, in the first quarter of this year, exposure to Russia rose US$3.3 billion to US$61.4 billion.



Russia threat hangs over foreign banks