Some of the major Russian banking institutions, classified as systemic relevance by the central bank, are discussing the possibility of resort to a state intervention If the deterioration of the portfolio credits intensifies itself over the next 12 months. Reports it Bloomberg News which cited confidential documents and sources close to the dossier.
According to the financial agency, the discussions are still informal but in the process of intensification. Therefore, the concern between the leaders of the banking sector for the rapid increase in deteriorated credits (NPL), which according to internal assessments would be far higher than what the official data disseminated by the supervisory authorities indicate.
The position of the Russian central bank
The Bank of Russia did not respond to Bloomberg’s commentary requests while the governor, Elvira Nabiullina, has minimized the risk of a systemic crisis. At the beginning of July, during a financial forum in St. Petersburg said that the Russian banking system is “well capitalized” and had capital reserves of 8,000 billion rubles (102 billion dollars).
“As a supervisory body on banks, I declare with full responsibility that these concerns are absolutely unfounded”
he underlined. The Bank of Russia has recommended credit institutions to focus on credit renovation instead of recognizing the real scope of the deterioration of loans.
The scenario
Bloomberg, however, reports that there are three banks of primary importance that they would have simulated intervention scenariosincluding the strategy with which to formally raise the question with the Bank of Russia in the event of worsening of the asset indicators. The sources, which remained anonymous as they are not authorized to speak publicly, have specified that at the moment no formal request has been made, but the possibility of a recapitalization intervention is considered concrete in the event of prolonged stress.
The current situation
Despite the signs of tension, the official picture of the Russian banking system appears relatively stable: i nominal profits remain solid and the declared level of NPL remains under the recorded peaks Previously previous stages of crisis, thanks also to containment measures implemented by the Central Bank. However, the current level of rates – with the Key Rate stopped at 20%, close to the historic highs – continues to compress the reimbursement capacity of families and businesses, exposing the institutions to a risk of accelerated deterioration of the assets. If the tendencies in place were to confirm, in the next quarters the financial stability of the sector could depend increasingly on the support of the tax and monetary authorities, in a context already marked by geopolitical uncertainty, volatility of international markets and restrictions.
