Russian financial system will be increasingly fragile

Subject

Russian banking and finance

Significance

The fall in the ruble and the expectation of year-on-year recession have not yet produced a banking crisis in Russia. However, the banking sector has already seen what may be warning signs. In February, Tavricheskii Bank and FundServisBank were put into temporary administration. Last year VTB said that it had received 100 billion rubles (1.8 billion dollars) in aid while Moscow announced in December that it would spend 40 billion rubles to support Gazprombank. Also in 2014, there was a run on private-sector Trust Bank; the bail-out, at 2.4 billion dollars, was the second-largest in post-communist Russia.

Impacts

• Additional bank bail-outs will put a strain on public finances.
• They would compete with other claims on the anti-crisis plan, about which there is already disagreement among state agencies.
• Tendencies to focus recapitalisation on the largest banks would increase the already high degree of state involvement in banking sector.