RTTNews - Wednesday, the Organization for Economic Co-operation and Development said demand-support measures will be less effective to the extent that the financial system is not operating smoothly. This indicates that maintaining the functioning of the banking system is of prime importance.
Now, the main threat to credit growth is solvency problems as the inability of borrowers to repay their loans increased.
The OECD noted that banks would be reluctant to lend as credit risks on new lending increase in an environment of negative real GDP growth. The real challenge would be to maintain capital adequacy and avoid a sharp curtailing of lending flows financing new activities, while minimizing moral hazard and the cost to taxpayers.
The Paris-based OECD predicts the Russian economy to contract 6.8% this year before recovering in 2010.
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