Image by Well-liked
Russia could be facing a banking crisis. The cumulative effect of Western sanctions and the collapse of the price of oil and gas on international markets has been a perfect storm. This week the Russian central bank (CBR) rescued the 12th largest lender in the country, B&B Bank, after injecting capital in Otkritie Bank last month to the tune of $7 billion.
For its part, the CBR says rather than a crisis, the interventions will leave a healthy, stable banking system in the country, preventing a domino effect, reports CNBC. B&B Bank could require up to $6 billion in capital.
“We realized that it’s better to isolate a bit more so that the domino effect does not arise, and according to the results of this work the domino effect is excluded, there is no risk of this,” Vasily Pozdyshev, deputy governor at the CBR, told a press conference as reported by state media, reported CNBC.
Russia has closed approximately 30% of the country’s financial institution, or about 300 banks since the recession started.
“The central bank cannot really allow to create an aura of vulnerability around a major bank because there are other banks that are rumoured to be in trouble,” Lubomir Mitov, chief economist for Central and Eastern Europe at UniCredit, said, reported The Irish Times.
Poor management and excessive spending were blamed for the latest failures.
Russia and OPEC have been attempting to raise the price of crude by curtailing production but the commodity has been stuck in a trading range of $45-$60 for the last several years. The production curbs are less effective than in the past due to American shale oil and members of OPEC who cheat on their quotas to gain market share.