Kremlin turns up pressure on state-funded banks, Medvedev says they should 'act responsibly'

By NATALIYA VASILYEVA , Associated Press

Last update: November 11, 2008 - 7:35 AM

MOSCOW - President Dmitry Medvedev urged state-funded banks to "act responsibly" Tuesday, the latest comments by top Russian officials warning that banks might be abusing the government's billion-dollar bailout.

Facing its worst economic crisis in a decade, Russia allocated billions of dollars to shore up the banking sector, channeling long-term loans through state-owned bank giants, Sberbank and VTB.

Since announcing the bailout more than a month ago, a growing chorus of officials have spoken out against the possibility of banks using the bail-out funds only to bolster their balance sheets or move funds offshore instead of lending.

Medvedev told one of the country's top business lobbies that banks must keep in mind that they are "not just commercial entities but also creditors."

"Everyone must act responsibly — both companies and banks that receive government funds," he told the Russian Chamber of Commerce and Industry.

Medvedev's comments follow similarly critical remarks by Prime Minister Vladimir Putin, who said Monday money movements out of the country would be strictly monitored to ensure that state funds aren't being misused.

Speaking during meeting with top bankers, Putin urged a crackdown on "corporate egotism, any kind of corruption or abuse."

He also said that the volume of money transfers abroad was declining on the average but is rising at banks that receive state support.

Yevgeny Primakov, head of the Russian chamber, said private banks "ceased to be solely commercial" when they accepted state money. "We need to demand that they do what the government and the society require — demand is the word," he said.

The Central Bank said Monday that net capital outflow hit a record high of $50 billion in October, bringing capital losses in the past three months to $83 billion.

Investors have fled, markets have sagged and the banking system is under stress from the world financial crisis and the falling price of oil, on which Russia's economy depends.

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