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By Bloomberg

Russia’s banking system is experiencing “some panic” after oil slumped, according to Sergey Dubinin, chairman of VTB Bank, Russia’s second-largest lender.

The free-floating ruble and higher central bank interest rates are a “bad combination” for the Russian economy, he told delegates at an event in London today. Even though they’re “painful” actions, policy makers don’t have any choice in the current circumstances after the currency plunged, he said, speaking at a Russian banking conference organized by Adam Smith Conferences.

Russia’s biggest state-run banks are suffering a plunge in profits, forcing some to seek government help, after the U.S. and European Union hit them with sanctions over the conflict in Ukraine and the ruble dropped the most in emerging markets. OAO Sberbank, Russia’s biggest lender, cut its 2014 profit forecast on Nov. 26, while VTB Group eliminated more than a third of its staff in Europe in the third quarter and sought state support to replenish capital.

“We will get through this situation,” Dubinin said of Russian banks. “Stabilization will happen, but unfortunately at those levels that will be unlikely to be favorable for the Russian banking system,” he said, referring to the oil price.

The Russian government will invest 39.95 billion rubles in OAO Gazprombank preferred shares from the National Wellbeing Fund, according to decree signed by the Prime Minister on Nov. 27, published today.

VTB, which converted a more than 200 billion-ruble subordinated loan from the government into preferred shares to boost capital, asked for additional state support of 250 billion rubles, Finance Minister Anton Siluanov said last week.

VTB shares have fallen 40 percent in London this year, while Sberbank dropped 53 percent.

Brent crude fell 38 percent since reaching this year’s high on June 19 and touched a five-year low of $67.53 a barrel yesterday. The ruble weakened 38 percent against the dollar in 2014.