foreign banks

Russia’s VTB: Capitalization of banking sector likely not needed

Reuters
Russia’s VTB: Capitalization of banking sector likely not needed

VTB. A VTB bank logo in the Moscow International Business Center, also known as Moscow-City, in Moscow, Russia, August 12, 2022.

Maxim Shemetov/Reuters

VTB, Russia's second largest bank, will start lending in the Chinese yuan and other non-Western currencies in late 2022

VLADIVOSTOK, Russia – The head of Russia’s VTB, Andrei Kostin, said on Wednesday, September 7, the nation’s banking sector had largely overcome the most serious effects of Western sanctions and that systemic capitalization of Russian banks was likely not needed.

Hit by unprecedented economic sanctions from the West, Russia’s banking sector posted heavy losses in the first six months of the year and officials have pushed lenders to drastically reduce their exposure to the US dollar and euro.

“It is maybe too early to say, the central bank is now analyzing the information, but maybe some kind of systemic recapitalization of the banking sector is not needed,” Kostin said at a session on the transformation of Russia’s financial sector at the Eastern Economic Forum in Vladivostok.

VTB, Russia’s second largest lender, returned to profit in July after record losses in the first six months of the year, and will start lending in the Chinese yuan and other non-Western currencies later this year, it said on Tuesday, September 6.

Kostin added later that there was room for Russia’s central bank to cut its key rate to 7.5% and then 7% from 8% now to stimulate lending in Russia’s banking sector.

The Bank of Russia next meets on rates on September 16.

Western sanctions on Russia over its actions in Ukraine have cut Moscow off from the global financial system and from nearly half of its $640 billion in gold and foreign exchange reserves.

Chief executive officer Kostin had said in April Russian banks would likely need a wider recapitalization to cope with losses.

Russian officials have heralded the economy’s performance in recent months, saying it is holding up much better than expected in the face of sanctions.

Russia Economy Minister Maxim Reshetnikov on Tuesday said the economic contraction this year would be 2.9%, shallower than previously forecast.

Kostin on Wednesday said VTB expects a 4% gross domestic product contraction, followed by a 1.5% drop in 2023.

Kostin and other panelists, including Igor Shuvalov, chairman of Russia’s state development bank VEB, discussed Russia’s de-dollarization drive and the need to further develop settlements and interactions with other currencies, such as the yuan and Turkish lira. – Rappler.com

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