MOSCOW: More Russian banks are feeling the strain from the country’s economic slump, highlighted yesterday by the central bank’s decision to pull the licence of mid-sized Probusinessbank.
Banks are under pressure as low oil prices and Western sanctions over the Ukraine crisis have caused a sharp economic contraction, leading to a deterioration in banks’ assets. “The financial crisis of the last year has definitely accelerated and increased the need to reduce the number of banks, because banks are facing a new round of bad loans,” said Alfa Bank economist Natalia Orlova.
The central bank said it had revoked Probusinessbank’s licence as the bank had failed to meet minimum capital requirements.
Probusinessbank had “carried out a high-risk policy connected with placing its monetary means in low-quality assets,” the central bank said, adding that the bank had exhausted its capital as a result.
In emailed comments, central bank deputy chairman Mikhail Surkov said the bank’s liabilities exceeded its assets by at least 67bn roubles ($1.04bn). “The hole was caused by the presence at the bank of various financial assets that had signs of being fictitious,” he said, adding that the central bank intended to inform law enforcement agencies if its suspicions were confirmed by documentary evidence.
The bank was the 51st largest by assets, making it a relatively big player in a country with over 700 banks, but not one of systemic importance. Russia’s top 20 banks account for three quarters of the sector’s assets.
Maxim Osadchiy, head analyst at CFB bank, said that while there was little likelihood of an immediate domino effect from Probusinessbank’s closure, the trend of bank failures could yet dent public confidence in the sector. “The situation is getting worse and worse,” he said. “If there are several more cases then even the closure of relatively small bank could cause a banking crisis — it can’t be excluded.”
So far, government measures to bolster banks appear to have been effective in preventing recent financial turmoil from eroding overall public trust in the banking sector.
The most recent June data shows retail deposits up 15.7 percent compared with a year earlier.
The support measures have included a one trillion rouble ($15.55bn) capital injection for 27 of the largest banks, financed from the government budget.
The government has also doubled the size of the pay-outs it makes to compensate depositors in failed banks, insuring 1.4m roubles ($21,800) per person per bank. While the insurance scheme has helped to reassure savers, it also means that the government is facing a growing bill as more mid-sized banks are closed.
Probusinessbank held some 27bn roubles ($420m) in retail accounts and deposits, according to its second-quarter accounts.
The withdrawal of its licence comes two weeks after the central bank closed mid-sized Rossiyskiy Kredit Bank and three smaller banks linked to it, which the state deposit insurance agency said would cost it an estimated 62.2bn roubles ($967m).
Last December the central bank took measures to shore up Trust Bank, another sizeable mid-sized bank, providing 127bn roubles in emergency financing.
Reuters
