Today the ghost of Northern Rock haunts many Russian bankers. It's understandable. Scared of rumors about another wave of crisis coming and further bankruptcies bankers are preparing for a possible depositors' run by the only efficient way -- saving cash. In this situation there is no point in expecting them to loan Russian companies as the risk to suddenly lose your own business because you cannot return deposits to your customers will outweigh any urging and even demands from the government to loan businesses.

To partially free bankers from the fear means to de-freeze significant funds for crediting the real sector. It can be done two ways; each involves correcting current legislation. First, the government needs to introduce a fixed deposit term, a standard that is in common use in most developed countries.

What a fixed terms does is tells depositors they cannot withdraw their deposits until the end of their deposit term. This norm can be obviously applied to only newly-opened fixed deposits. Second, the government needs to once again raise the threshold for state guarantees for all deposits. For example, from the start of the crisis the guarantee level was raised from 35,000 pounds to 50,000 pounds in England and from $100,000 to $250,000 in the USA.

Enacting these two simple measures would enable banks to freely loan hundreds of billions of rubles to Russian business.

The ongoing crisis is a debt crisis. And the root of the problem lies in the fact that due to the sharp fall in economic activity enterprises have fallen into to a so-called demand pitfall.

Many Russian companies' short-term loans, for example, do not correspond with their current volume of demand. While demand will inevitably recover, allowing these companies to service and pay debts, it is extremely essential to help enterprises to survive until demand has recovered.

Having diagnosed the situation we need to specify the remedies--tax reduction, final demand stimulation, direct financing of enterprises, loan guarantees, writing-off a part of a debt by converting it into shares or its devaluation though switching on the printing press.

Unfortunately, the last remedy is not really suitable for us now since newly printed cash would quickly be converted into foreign currency rather than flow into the real sector. Here are several key initiatives able to provide a drastic change for the better.

1. Direct tax loans for Russian enterprises. Every company, regardless of its size, that has always paid taxes, has the right to receive its piece of government help. When companies can't get credit from bank channels, the government needs to provide support directly. One method is to give non-commodity sector 10-12% corporate loans for five to seven years on 10-20% of what the companies paid in taxes for the previous one or two years. Not only is this measure non-corruptive, fair and efficient but it would also stimulate banks to lower loan interest rates and at the same time encourage diligent taxpayers.

2. Significant expansion and improvement of refinancing new bank loans via the Central Bank of the Russian Federation. The Central Bank needs to temporarily act as the main source of long and relatively cheap resources until capital markets recover completely. Banks can start granting loans to companies only when they can be refinanced by the Central Bank with reasonable terms. With three-five-year refinancing terms, an interest rate equal to the current refinancing rate, i.e. 13% and 10-15% discount of the loan sum, banks will undoubtedly have powerful economic incentives to re-start long-term credits to Russian business.

3. Re-tooling public-private partnerships. Government can significantly expand its aid programs for the real sector and simultaneously save hundreds of billions of rubles through a program that guarantees banks interest payments on its previous loans. While the bank will be required to assume the risk of getting the main loan repaid, with interest rates at 16-18%, government guarantees of $14.7bn would give banks an opportunity to prolong their loans for a year and a half or two years, this saving loans now currently worth between $44bn and $58.6bn.

A hundred years ago Vladimir Lenin formulated a method of resolving complex problems. ''First you need to identify the main link, and then you can pull out the whole chain.'' The loan and debt chain is our complex economic problem. By find efficient ways to solve the problem, the government, regional authorities and private business can jointly untangle the debt to create conditions to revive economic growth by 2010.

Maybe it's time to follow the proletariat leader's sensible advice?

Oleg Elshin is the executive director and managing partner at the East Kommerts Investment Group. Mr. Elshin has more than 14 years of successful experience in investment banking, including management positions at leading Russian firms such as UralSib and Rosbank.

The opinions and sentiments expressed herein are those of the author only and not necessarily those of Marchmont Capital Partners or any other person. This article was originally printed in the Russian newspaper Vedomosti on April 15, 2009 and Marchmont News on April 24, 2009 and it is republished here with permission of the author.