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Analysis: Will The Media Pay For Russia's Banking Crisis?

The fallout from this month's banking crisis in Russia continues, and the media are not being overlooked in the quest to pin blame. Central Bank Chairman Sergei Ignatev himself has been among those who said that the crisis of confidence was provoked in large part by unscrupulous competition in the banking sector and fueled by stories planted in the press.

On 19 July, Alfa Group Chairman Mikhail Fridman told reporters that Alfa Bank lost about $9 million during the panic, and that shareholders had invested an additional $1 billion in order to keep the bank functioning while jittery depositors rushed to withdraw their funds. "The bank's total losses connected with this problem run to tens of millions of dollars," Fridman said, according to "Nezavisimaya gazeta" on 20 July. RBK reported on 20 July that the bank lost 20 percent of its individual-deposit accounts during the three-day run.

Analysts quoted by RBK laid no small part of the blame for Alfa's troubles on the bank's management, particularly on a controversial decision to charge a temporary 10 percent fee on withdrawals. Sector analyst Andrei Serdechnov slammed the bank for "inexcusably harsh actions against individual depositors to stop withdrawals during the crisis despite all its statements that the crisis was not serious."

Fridman, however, predictably blamed the Central Bank -- saying "it would have been possible to act more rigorously and energetically" -- and the mass media. Promising to sue certain media outlets for spreading "rumors about the bank's problems," Fridman even went so far as to say that it would seek from the media an amount equal to what it lost during the panic, including "direct losses, lost opportunities, and reputation risks," "Vremya novostei" reported on 20 July.

Fridman singled out "certain publications" of the Kommersant publishing group as having "provoked the crisis" for "self-interested" reasons. The Kommersant group is owned by self-exiled tycoon and former oligarch Boris Berezovskii. "Nezavisimaya gazeta," which is also owned by Berezovskii, quoted Fridman on 20 July as saying that unscrupulous competitors "were acting exclusively through journalists." The daily also noted that Fridman and Alfa Bank President Petr Avon won a high-profile libel suit against "Versiya" in 2003. "We have quite a lot of experience with lawsuits against unscrupulous media," Fridman was quoted as saying.

"Novye izvestiya," which was once owned by Berezovskii but was taken away from him last year, reported that the Association of Russian Banks (ARB), together with the Central Bank, is conducting an investigation into the recent panic, although the results of the probe might never be made public if it is determined that certain players within the banking sector provoked it intentionally. "For now I cannot answer the question of whether we will make the results of our investigation public," ARB President GareginTosunyan told a 27 July press conference.

Nonetheless, the daily cited Alfa Bank officials as repeating the charges that "someone created the crisis for us" and that "it was beneficial for someone to 'tout' Alfa Bank." Alfa Bank Vice President Aleksandr Gafin declined to name names, but said that one need only consider which forces and which political currents are interested in destabilizing the situation in the country. Gafin added that the crisis "was a political order" that "is bigger than the interests of just one or another economic group." According to "Novye izvestiya," Gafin singled out media belonging to Berezovskii as having been the first to include Alfa Bank on lists of supposedly troubled banks.

Whether Berezovskii or his media outlets intentionally provoked the banking crisis and the panic around Alfa Bank in particular or not, there can be little doubt that Fridman would further boost his standing with the Kremlin by launching a so-called business dispute that would result in the former oligarch losing his most visible remaining foothold in Russia.

Political ambitions aside, efforts to blame the media for the crisis and to compel media outlets to reimburse banks for their losses smack of scapegoating. If the public had greater confidence in the government's intentions and the Central Bank's policies, the ability of media reports to spur panic would be sharply curtailed. If the banking and financial sector were more fundamentally transparent, then rumors would have far less power to create such frenzies. Banking-sector players are the ones who benefit most from opacity in the sector, spreading rumors as a means of "unscrupulous competition." If the victims of that competition are able to recoup their losses by suing the media rather than identifying those who planted the rumors, there will obviously be no incentive to boost confidence-building accountability.