Is Russia going through a banking crisis?

There is a banking crisis in Russia. The Commissioner for Protection of the Rights of Entrepreneurs under the President of Russia, Boris Titov, stated this today at a round table organized by the Russian National Committee of the International Chamber of Commerce (ICC Russia).

According to him, after the fall of the volume of consumer credits, banks are faced with a huge problem of bad, overdue and not returned loans. "This problem is disguised, only Gref began to talk a lot about a banking crisis in the country, it really exists, because there is a huge amount of bad loans, which are catching up with our banks," RBC quoted Titov as saying.

The head of Sberbank, German Gref, stated that the Russian banking sector is undergoing a large-scale crisis, the most protracted in the last 20 years. "Everything we see right now is a large-scale banking crisis. We see zero profit in the banking sector, a huge formation of reserves, the Central Bank has to clean the banking sector from banks that are not really banks. The overall situation in the banking sector is very serious," Gref said, adding at the same time that the overall situation is under control.

In an interview with Vestnik Kavkaza, the chairman of the National Currency Association, Dmitry Piskulov, noted that currently the state of the banking system is not as perfect as it was a few years ago. "There are several reasons. First of all, the Central Bank actively decreases the number of banks. And for many customers it looks like a kind of crisis, because they have to look for another organization. Secondly, the interest rate margin of banks has decreased, expenses increased. The devaluation has allowed a number of banks to earn money, while for others it only did a bad thing by overestimating liabilities towards obtaining the losses. Many banks reduced their capital adequacy ratio," he said.

"In addition, a new requirement of Basel III is gradually being introduced, which will further increase the regulatory burden on the banks, particularly the liquidity ratios, capital adequacy, creation of provisions, and so on. In this regard, such an economic situation has developed in which banks are afraid to lend to any businesses, especially medium-sized and small ones, or it is simply not profitable for them to do it. They are quite willing to lend to large enterprises, but as for the rest of the borrowers, the quality requirements for credit risk has increased dramatically, which sometimes makes the process of lending unprofitable for the bank in terms of the creation of reserves," the expert explained.

At the same time, he drew attention to the fact that now there is a steady decline in the monetization of the economy. "It is possible that this is one of the measures of the Central Bank to control inflation, which has the primary mandate for this fight. Accordingly, nobody in the banking system has enough liquidity. Currently, many companies are experiencing a lack of working capital or funds for investment. The banks can't provide it," he stressed.

For his part, the chairman of the Duma Committee on Economic Policy, Innovation and Entrepreneurship Development, Anatoly Aksakov, expressed doubt that the banking sector in Russia is going through a large-scale crisis. "The crisis of the system is determined by quantitative indicators. The capitalization of the banking system is growing, the deposits of the population are being replenished, the volume of lending to legal entities is also growing," he explained.

At the same time, he noted that to date there is only one indicator with negative rates, the indicator associated with lending to individuals. "This is connected with the fact that banks are trying to lend to people with restraint, because the real incomes of the population are falling. They try to study borrowers very carefully before granting loans. The banking system is experiencing some problems, and these problems are related to the macroeconomic situation in the country. In general, the situation in the rest of the economy is much worse than in the banking system. It cannot help but experience difficulties in connection with the problems in the major economy, but it is more stable, it stands firmly on its feet, unlike other sectors of the economy," Anatoly Aksakov summed up.