Training on modelling fundamentals December 17–18

Russian banking sector starves for capital injections from the Central Bank to revive

Overview: capital adequacy of Russian banks

  • Rehabilitation potential of the banking sector is limited. Slow growing loss absorption buffer, from 5.3% in 2017 to 5.8% by 2022, will limit banks' ability to improve asset quality in the next 3–5 years. On the other hand, a substantial cleanup of the sector from problem assets has been carried out by induced interventions from the Bank of Russia acting through the Banking Sector Consolidation Fund (BSCF). The experience obtained in 2014–2016 forced banks to apply stricter approaches to borrowers in order to avoid possible losses.
  • Concentration of banks' balance sheets on high-risk assets is being dissolved. Growing structural surplus of liquidity, which has been seen in the sector since late 2017, coupled with a weak economic growth expected by ACRA at 1.5–1.7% until late 2021, will, most likely, force banks to allocate free funds into low-risk assets1. It will drive capital adequacy up, regardless the expected decline in returns (ROAA of about 1%, ROAE of not more than 10%).

The full version of this document is only available after a payment.

To clarify the cost and terms of payment, please contact Artem Mayorov

phone: +7 (495) 139 04 80, доб. 147, email: artem.mayorov@acra-ratings.ru

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