By Alex Nicholson and William Mauldin
Sept. 17 (Bloomberg) -- Russia halted stock trading for a second day, poured $44 billion into its three largest banks and relaxed restrictions on lenders to stem the worst financial crisis since the nation defaulted a decade ago.
The central bank slashed reserve requirements for banks, freeing up as much as $12 billion, and the Finance Ministry allowed OAO Sberbank, VTB Group and OAO Gazprombank to borrow the $44 billion for three months. The benchmark Micex index plunged as much as 10 percent, bringing its three-day decline to 25 percent.
Russia's markets are facing the biggest test since the government defaulted on domestic debt in 1998. The decade-long economic boom is fading, foreign investors have pulled at least $35 billion from the nation's stocks and bonds since the five-day war in Georgia last month, and the collapse this week of Lehman Brothers Holdings Inc. and American International Group Inc. prompted a flight from emerging markets.
``I will tell my clients today to continue to abstain from buying Russian assets'' until economic problems are solved, said Zina Psiola, who manages a $1 billion Russian equities fund at Clariden Leu AG in Zurich.
The cost of lending has soared to a record, with the MosPrime overnight rate reaching 11.1 percent today, deterring speculative bets in equities. Russian stocks have lost more than $425 billion in value since reaching an all-time high May 17.
The Moscow-based brokerage KIT Finance said it's in talks with investors to sell a stake after failing to meet some financial obligations related to repurchase agreements.
`Heightened Risk'
``Heightened counterparty risk means that the only place to raise cash is the equity market,'' said Julian Rimmer, head of sales trading at UralSib Financial Corp. in London. ``Every time the market opens we have selling to meet margin calls, which triggers stop-losses, more margin calls and redemptions.''
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