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Sancho Panza

Russian banking crisis looming?

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Another story of expanding private sector debt hitting the brick wall of non payment.

Moneyweek 29.9.17


CNN Money 21/9/17

'The latest rescue was confirmed Thursday by the central bank, which said it had nationalized the country's eighth largest lender by assets, B&N Bank.

Otkritie Bank, Russia's largest privately-owned lender, needed a bailout of its own in late August to help plug a $7 billion hole in its balance sheet.

The failure of two major lenders in quick succession has raised questions about the health of Russia's banking sector, which has been battered by an economic slowdown and western sanctions..

"The "domino effect" ... can be completely ruled out," deputy bank governor Vasily Posdyshev said, according to state media. "There is no risk here."

Russian banks are under pressure because of the deep economic crisis that began in 2014, which was fueled by a double whammy of low oil prices and sanctions.

Official statistics show that 22 million Russians now live below the poverty line, up from 16 million before the crisis.

The slowdown was preceded by a major credit boom. Private debt increased from 50% of GDP in 2005 to almost 90% in 2015, according to the Bank for International Settlements.

"Following the collapse in oil prices and the ruble and the subsequent recession, households and firms have struggled to repay these loans," said Jackson.

The official share of bad loans in Russian banks is now 10%, compared with 6% before oil prices collapsed.

The International Monetary Fund warned Moscow last year that banks may not be giving a full picture of their bad loans. The IMF said the actual ratio of bad loans could be as high as 13.5%.

There's more evidence of pain: The central bank has closed 300 failing lenders -- many of them small -- in recent years.

The Russian economy has since emerged from recession, and the core of its banking system appears to be strong.

The three biggest lenders hold roughly 50% of the country's assets and each is controlled by the state. Otkritie, the largest private lender, accounted for just 3.5% of total bank assets.

Moscow runs a small budget deficit, and government debt is relatively low at less than 20% of GDP. '


Edited by Sancho Panza

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Just looks like a fairly normal (if we can call such things normal) set of bailouts to me. Not much different to what happened and is still happening in the West and elsewhere.  

This news is 15 days old so we will just have to wait and see what happens next (if anything).

Sale of these banks is already being discussed and one can imagine there being quite a few interested parties (China, in particular).

Edited by Errol

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