"RBC daily": "Banks at risk"
Even top 20 banks may be hit by liquidity shortage.
It would be premature to report stabilisation of the Russian banking sector. Even the top 20 Russian banks may be facing capitalisation problems in 2010, according to Mikhail Zadornov, head of Bank VTB 24 and a former finance minister. Many banks are already struggling to improve capitalisation, Zadornov said, but the problem is hidden by relaxed bank accounting and reserve requirements.
"I believe many problems faced by Russian banks are hidden by Russian accounting standards," Zadornov said. With the eased reserve requirement, banks do not establish appropriate loan loss reserves. "This means the problem of capitalisation already exists, only we fail to see it," Zadornov added. In his words, once the Central Bank and the government raise reserve requirements to pre-crisis levels, or tighten accounting rules, some of the top 100 banks will go bankrupt or will require financial assistance. "Even some of the top 20 banks will face capitalisation problems," Zadornov stressed.
Zadornov therefore expects the regulator to extend the current easy reserve requirement until the end of this year. "There is no other option in the current situation. Otherwise, with the overdue debt growing at the current rate and the increasing amount of restructured loans, banks will be compelled to establish very large additional reserves, reducing their capital," he explained.
Last autumn, First Deputy Chairman of the Bank of Russia Alexei Ulyukayev tried to assure the public that capital adequacy is high in Russia's banking sector, citing a level of 19%. This was probably the reason why Prime Minister Vladimir Putin announced a possible cut in government support of bank capitalisation through the federal loan bonds (OFZ) in 2010 from 250 billion to 100 billion roubles.
Anatoly Aksakov, President of the Association of Regional Banks of Russia, is convinced that Central Bank officials are perfectly aware of the real situation in the banking sector and each bank's particular problems. "Therefore, the regulator will be tightening accounting and reserve requirements gradually and smoothly, so as to avoid shocks," he said. Incidentally, banks did not seem eager to use the provision for recapitalisation through OFZ anyway. "I hope the unused OFZ funds will go into subordinated loans instead," he said.
The problem is that banks need to know whether the regulator is planning to extend the soft requirements, according to Sergei Moiseyev, director of the economic research center at the Moscow Financial and Industrial Academy. "Banks have to draw up their financial plans. They must know whether they should plan a reduction of capital and look for additional sources of recapitalisation. So far, the regulator has not given them a clear answer," Moiseyev says.
Sergei Lavrentyev
