OREANDA-NEWS. October 14, 2010. CBR released its estimate for 3Q10 Russian foreign debt, which amounted to USD 480.2bn, or 32% of expected 2010 GDP. Bank debt has increased by USD 18.1bn over the previous quarter to USD 140.2bn, while company debt has reached USD 291.6bn (a USD 5.1bn rise), reported the press-centre of OTKRITIE Financial Corporation.

View: We believe that the main reason for the massive 5.3% QoQ increase in gross foreign debt was a rapid depreciation of the US currency, which lost 12.6% of its nominal value to the euro during 3Q10. Since a large share of Russia’s foreign debt is EUR-based this move in the USD/EUR exchange rate has led to growth of debt in nominal USD terms.

While the banking sector has shown a significant QoQ rise in nominal debt volumes (+USD 18bn), its total debt still remains 29% below the 3Q08 peak. The rise in debt levels was also partly driven by increased private borrowing as Russian banks utilized opportunities to attract cheaper wholesale funding. We believe this reflects their need to balance their currency position along with increased demand for currency-denominated loans. This also means that banks no longer expect excessive liquidity levels to last much longer and will likely support the capital account in coming quarters.