«If we don't reach a lasting peace agreement, we know what scenario awaits us, it has a name, war» word of François Hollande. Perhaps. But while waiting for tomorrow's meeting to reach an agreement between Ukraine and Russia mediated by France and Germany, the eyes and ears of the world of finance are focused on the federation's banking system and on the weaknesses that have followed one another in recent months which it is difficult to imagine an epilogue in the short term.
The economist Davidia Zucchelli of the International Research Network of Intesa Sanpaolo has dedicated interesting pages of insights to the difficulties of the Russian banking system which highlight how it is strongly affected by two factors which, Zucchelli points out, put a strain on test the banking system: US and EU sanctions and the devaluation of the ruble. The devaluation of the national currency, in particular, which at the end of 2014 saw its value halved against the dollar, contributed to the exacerbation of a process already started by the restrictive measures imposed by the Western allies. The sanctions in the banking system have resulted in limitations of access to the international financial markets and the consequences deriving from these impediments risk aggravating the state of the country's real economy. The limits on foreign-derived loans have led Russian banks to initiate a series of actions, on the one hand, to safeguard the goodness of their customer portfolios and on the other, to guarantee the margins associated with credit operations.
In recent months, interested in the quality of their customers, the banks have adopted restrictions on the granting of loans with the consequent slowdown in loans especially to households (16,6% in October 2014 from 29% in the same period of 2013), less with regard to businesses (loans stable at around 19%). Not only that, given the need to guarantee returns, the interest rate applied recently stood at 15% from 10,5% in December 2013.
To the above reasons which are causing the reduction in credit and high interest rates, we add two further considerations which keep the banking system steadfast in its positions: the first, concerning the fears of tensions linked to liquidity and which could lead to confidence in the system itself, the second, certainly tangible, connected to the already bankrupt 86 domestic banks during the past year and the bankruptcy forecasts of another 200 banks for the current year. As proof of how the climate of distrust and not only of externally derived difficulties is affecting the federation's banking system, the Intesa Sanpaolo economist refers to the 1m interbank rate of around 30%, a sign, in general, of a scarcity of mutual trust and, in particular, the quality of the customer portfolio of Russian banks.
In such a moment of fragility, Zucchelli points out that, on the one hand, the Central Bank is thinking about keeping the system stable with funding operations to public banks for entry into the system (at the end of 2014) estimated at around 7000 billion rubles, on the other, the Government which has purchased 39,95 billion rubles of Gazprombank shares, which is preparing an anti-crisis plan worth over 2 trillion rubles for the support of the economy, and which apparently intends to direct 1000 billion rubles to the Deposit Insurance Agency to subscribe to subordinated bank bonds whose main objective is to finance projects in strategic sectors (energy, aeronautics, military, defence, etc.).
It is difficult to predict what will happen in the short term and what the repercussions will be on the country's banking system.
The next few hours are expected around the negotiating table in Minsk.
