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The Russian banking sector: between instability and recovery

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Abstract

Russian banks seem to be slowly emerging from the country’s 2014–15 economic and financial crisis, which had been triggered by the oil price plunge and Western sanctions. While the economy has recovered from the recession and macroeconomic stability has been re-established (including record-low inflation), GDP growth is still modest. Lending has gone from a crisis-driven credit crunch to a retail-driven recovery, while deposits, buoyed by sustained confidence, have expanded. However, some medium-sized private banks, burdened by legacies of mishandled crisis-triggered takeovers of smaller outfits, collapsed in the second half of 2017, delaying the overall improvement of credit quality, profitability and capital adequacy. In reaction, the central bank nationalized and bailed out these systemically relevant players and established a “bad bank” to more effectively control restructuring procedures. While credit risk and related-party lending risk remain serious, shock-absorbing factors are ample and have further accumulated (including high foreign currency reserves, sizable net external assets and a solid fiscal position).

Suggested Citation

  • Stephan Barisitz, 2018. "The Russian banking sector: between instability and recovery," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 35, pages 59-66.
  • Handle: RePEc:onb:oenbfs:y:2018:i:35:b:2
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    File URL: https://www.oenb.at/dam/jcr:fd7b192f-3601-4272-924d-a7f17f7af035/fsr_35_the_russian_banking_sector.pdf
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    References listed on IDEAS

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    1. Stephan Barisitz, 2013. "Nonperforming Loans in CESEE – An Even Deeper Definitional Comparison," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 67-84.
    2. Stephan Barisitz, 2015. "The Russian banking sector – heightened risks in a difficult environment," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 30, pages 71-84.
    3. Stephan Barisitz & Mathias Lahnsteiner, 2010. "Russian Banks on the Route of Fragile Recovery," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 20, pages 77-85.
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    Cited by:

    1. Stephan Barisitz & Philippe Deswel, 2023. "Russia’s banking sector and its EU-owned significant banks, against the backdrop of war and sanctions," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/23, pages 23-41.
    2. Stephan Barisitz & Philippe Deswel, 2021. "European banks in Russia: developments and perspectives from 2017 through the COVID-19 pandemic (2020/2021)," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3/21, pages 59-75.

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    More about this item

    Keywords

    banking sector; banking crisis; connected lending; credit risk; nonperforming loans; recovery; restructuring; Russia; sanctions;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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