April was a scary month for Russian bankers as more aftershocks from the US subprime crisis arrived in Eastern Europe. The banks in Moscow had already been rocked by the closure of the international credit markets, but they faced a system-threatening liquidity squeeze of their own in April. Russia's banking system is still rudimentary, and liquidity is squeezed around Easter every year as domestic companies all call on banks for cash to pay their taxes. This year, the cash shortage was dramatically exacerbated, by the combination of the international credit crisis and a change in VAT rules, to the point that a systemic collapse of the bank sector was conceivable. Aware of the danger, the Central Bank of Russia (CBR) accumulated a war chest of more than $100 billion to shore up liquidity and maintain confidence.
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