The Russian banking sector remains generally stable, despite reduced financial stability of some banks, the World Bank said in its Russian Economic Report released on Wednesday.
“Despite the failure of some large private banks in 2017, the overall performance of the banking sector has been stable. The banking sector’s fundamentals have improved through August 2017, following the rest of the economy. Throughout the year, the key risk and performance indicators remained largely unchanged and credit growth picked up moderately,” Tass quoted the report as saying.
At the same time, according to the World Bank, the aggregate capital adequacy ratio “remained stable throughout the year at around 13%, against a regulatory minimum of 8%, due to modest lending growth and profitable bank performance earlier in the year.”
“However, loss of capital and recognition of negative financial results of banks under resolution weakened the overall sector performance in September,” the report said, noting that the failure of some of the largest private banks negatively affected Russia’s aggregate banking sector profits, which declined for the first time since the beginning of 2017.
Thus, the total net profit of the Russian banking sector declined in Q1-Q3 to 675 billion rubles ($11.7 billion) from 997 billion rubles ($17.3 billion) from January to August. “This drop observed in banking profits was attributed to the one-off recognition of negative financial results caused by additional provisioning for non-performing loans of banks under the Banking Sector Consolidation Fund resolution,” the World Bank said.
The new budget (fiscal) rule is an important structural reform in Russia, Apurva Sanghi, the World Bank’s lead economist for Russia, told reporters.
“The new fiscal rule is based on fixed benchmark oil price and is an important structural reform. Along with the switch to targeting of inflation, the fiscal rule shows firm commitments of Russian authorities to deepening macroeconomic stability,” the economist said.
