Russian taxes squeeze banks; new funds seen soon

By Yelena Fabrichnaya

MOSCOW (Reuters) - Russia said on Monday new funding sources could be open to banks from next month, as available resources were squeezed by month-end tax payments, supporting the rouble and pushing money market borrowing costs to one-week highs.

With an estimated 460 billon roubles (10.9 billion pounds) of tax payments due this week, according to Renaissance Capital, pressure is set to rise on a banking system already hard-hit by the global credit crunch and a flight of foreign capital.

In future, new funding avenues may ease the strain.

The central bank's first deputy chairman Alexei Ulyukayev said on Monday that six-month collateral-free loans and repo auctions with share collateral could start from next month, while an agreement on partial compensation of banks' losses from interbank operations may be signed this week.

Overnight interbank rates were fixed at a one-week high of 10.75 percent, bids at the day's first repo auction exceeded the 300 billion roubles on offer, and banks snapped up nearly all the money offered in collateral-free loans by the central bank.

The central bank also upped the daily limit on currency swap operations to 150 billion roubles on Monday, a 15-fold increase from Friday's cap.

"That is how we see the liquidity situation...including the effect of taxes," said Ulyukayev, asked about the increase in the limit on the swaps.

Dealers said exporters were converting foreign earnings to cover their tax bills, offering support to the rouble.