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would be sufficient to destabilise the whole banking system. As lender of last resort, the Russian government claims it can turn to large firms in which the state has a stake or large commercial banks if it must mitigate the effects of an unexpected systemic shock. Observers note, however, that such assistance might not be forthcoming in a crisis. For this reason, the CBR wants to clarify its banking supervision and capital adequacy requirement to deal with this concentrated lending arrangement.
From the standpoint of the overall economy, the end of foreign financing and the return of export firms to the domestic market could raise critical issues about the availability of financing. Companies fund the lion’s share of their fixed investment either out of pocket or with government-provided budget support. In the corporate sector, however, about three-quarters of all external financing is provided in the form of bank loans. Companies involved in the war effort or import substitution should continue to benefit from government support programmes or direct budget subsidies. In contrast, the access of private firms not involved in the war effort to inexpensive financing for their own investment projects could weaken. Because the domestic banking sector is also a significant purchaser of government treasury bonds, competition for credit could become fierce if government financing needs increase in coming years.
Despite rapid growth in borrowing, the overall capital adequacy of the Russian banking sector remains good. Bank fundraising has been supported by wage hikes and increased interest rates on bank deposits, which is reflected especially in the growth of household deposits. According to media reports, growth in bank deposits has also been supported by certain Russian firms and wealthy private individuals repatriating their assets in the West to Russia. A budding domestic recovery may also be contributing to the slowdown in growth of Russian household deposits in foreign banks. A modestly positive economic outlook and rapid growth in the loan stock has kept the amount of non-performing loans relative to the total loan stock quite low.
USE OF WESTERN CURRENCIES DECLINES DRAMATICALLY .
13 RUSSIA Country Report July 2024 www.intellinews.com