Moody\'s Investors Service said that the
Russian government\'s support measures for the Russian banking sector are
unlikely to lead to any upgrades as both liquidity and capital will be
allocated mainly to state banks with ratings that already incorporate a
very high degree of systemic support. Moreover, the recent measures are
understood to be temporary support for the banking system and therefore
will not affect Moody\'s long-term ratings.

Similarly, the measures are unlikely to prevent downgrades of banks that
have relative weaknesses in their business model that are not necessarily
due to temporary funding shortages. In fact, the financial crisis may
reveal fundamental weaknesses in a bank\'s asset quality, capital or
business model.

For a discussion of Moody\'s approach towards government support for
banking systems, see Moody\'s Special Comment \"Assessing the Rating
Implications for Banks of the Current Market Turmoil and Governmental
Interventions to Support Their Banking Systems\" which was published on 8
October 2008.

The Russian government\'s announced support measures include:

- Plans to provide RUB950 billion (USD36.3 billion) in the form of
ten-year subordinated loans to eligible institutions (see below for
details);

- An increase in the amount of federal budget funds eligible for
placement with commercial banks to RUB1.5 trillion (USD57.3 billion) and
proposed extension of the list of banks entitled to hold these funds to
more than 100, up from 28 as of today;

- Proposals to allow the Central Bank of Russia (CBR) to provide loans to
commercial banks on a non-collateralised basis;

- Access for all banks to direct repo deals with the CBR (previously only
available to banks classified as \"financially stable\" by the CBR);

- Increase in the amount of private deposits subject to 100% compensation
under the Deposit Insurance Scheme to RUB700,00 (USD26,750) from
RUB100,000 (USD3,800); and

- The allocation of USD50 billion from CBR\'s foreign currency reserves to
the state-owned Vnesheconombank (in the form of CBR\'s deposit) for
onlending to banks and companies with external debt obligations that are
falling due soon.

Eligible institutions are mainly state-owned banks that have a systemic
importance for the Russian banking sector. Sberbank, the country\'s
largest bank (rated D+/A1) is expected to receive more than half of the
total allocated funds -- RUB500 billion (USD19.1 billion) -- directly
from CBR, its controlling shareholder. The remaining RUB450 billion
(USD17.2 billion) will be channelled into the banking system through
Vnesheconombank, which will provide RUB200 billion (USD7.6 billion) to
the majority state-owned Bank VTB, Russia\'s second-largest bank (rated
D-/A1). Vnesheconombank will also provide RUB25 billion (USD0.9 billion)
to another state bank, Russian Agricultural Bank (rated E+/A3) and
RUB225 billion (USD8.6 billion) to private banks. This will be on the
condition that their shareholders make contributions in the same form of
long-term subordinated loans of an amount equal to 200% of the funds
allocated by the government.

The increase in the amount of federal budget funds eligible for placement
with commercial banks derives mainly from a significant extension of the
limits set on the state banks. The limit on Sberbank has been increased
to RUB754 billion (USD29 billion), on Bank VTB to RUB268.5 billion
(USD10.3 billion) and on Gazprombank, the country\'s third-largest bank
(rated D-/A3) to RUB104 billion (USD4 billion)

Moody\'s generally views these measures as helpful for the following
reasons:

- The amount of long-term subordinated loans provided will be equal to
30% of the Russian banking sector\'s total equity as of 1 September 2008.
This will create a significant buffer for the loan losses that Moody\'s
expects to materialise over the next 12--18 months as a result of the
liquidity squeeze and the slowdown of economic growth. It is likely, that
in the event of material asset quality deterioration subordinated loans
provided to state-owned banks will be converted into Tier 1 capital.
These funds will significantly increase the ability of banks (mainly
state-owned but possibly some private ones as well) to lend money and
mitigate the negative effects of the liquidity squeeze and weaker
economic growth.

- Moody\'s expects that the liquidity and capital support provided by the
Russian government will ease some of the more extreme pressure being
exerted on the banks by the market. In Moody\'s opinion, this pressure is
not fully related to the fundamentals of the banks themselves. In
particular, the allocation of funds to companies facing repayments of
their cross-border obligations could reduce the direct and indirect
negative impact on the banking system from possible defaults of some
Russian banks and companies on their external debt.

However, Moody\'s also believes that there is a risk that the pool of
liquidity provided by the government will not be fully distributed by the
state-owned banks to private banks, particularly small and medium-sized
ones, as it is presently unclear what incentives and risk mitigation
mechanisms state banks have to be involved in such interbank lending. If
the state banks fail to fully distribute the liquidity, the amount of
government support might be insufficient to deal with the current
liquidity crisis in the banking market.

For a detailed description of the possible impact of the current credit
and liquidity crisis on Russian banks please refer to Moody\'s Banking
System Outlook on Russia published in September 2008.