Structural Problems Persist in the Banking System

9 january 2017 | Rossiyskaya Gazeta

Daniil Nametkin, Deputy Head of the Department for Expert Analytics of the Analytical Center, believes that structural problems persists in the banking system. An evidence of that, according to the expert, is that the number of revoked banking licenses continues to rise: in 2016 it was higher than in either 2014 (87 banks) or in 2015 (93 banks).

Daniil Nametkin
Daniil Nametkin
Department for Expert Analytics

"Moreover, we saw some significant problems with major banks that are rated among the top 150 in terms of the value of their assets: only 7 of the credit institutions had their licenses revoked but their scale has significantly increased," Mr. Nametkin told a Rossiyskaya Gazeta correspondent. The Deposit Insurance Agency paid out a total of RUB 237 billion after the closure of Vneshprombank, Intercommerzbank, BFG-Credit, Finprombank, Rosinterbank, Military Industrial Bank and Aimanibank, which is 40% more than the amount paid after the closure of the 9 banks out of top-150 list with their licenses revoked in 2015.

"One significant cause for concern is that the current problems that the banks are having could not have been anticipated from the stress tests that the Bank of Russia carried out in early 2016 in order to see how robust the banking sector was," Mr. Nametkin believes. "Those stress tests showed that only 63 banks could experience capital shortage if at least one of their sufficiency criteria was not met. In reality, however, even though the actual macroeconomic conditions were much better than those predicted by the Bank of Russia’s stress scenario, the total losses were much worse."

The large-scale purges in the banking sector in recent years are driving more and more clients from small banks to systemically important financial institutions. This matter is especially relevant for corporate entities that could potentially lose all their assets should their licenses be revoked. This, in turn, is putting additional pressure on small banks, making them a target for the new repressions by the regulator, the expert notes.

Source: Rossiyskaya Gazeta