Central Bank plans to withdraw support measures for the banking sector – RealnoeVremya.com
Regulator believes peak loan restructuring linked to pandemic has passed
The Bank of Russia believes it is time to cut back on measures that have helped Russian banks weather a difficult period of massive loan restructuring. Although a small part of the loan portfolio may still be at risk, the banking system as a whole is healthy.
Russian banking sector ready to live without regulator’s COVID-19 support, says Reuters quoting the Bank of Russia. The regulator relaxed some of its financial regulatory rules last year to avoid a banking crisis, as the coronavirus pandemic has seen many entities lose their income and hit the income of Russians as a result. The support measures, which ranged from declining capital reserves and provisions to emergency liquidity lines, guaranteed banks 1,000 billion rubles ($ 13.6 billion) of additional capital equal to 10,000. billion rubles in new loans.
However, on February 18, the bank’s director, Elvira Nabiullina, said the peak in loan restructuring had passed and the domestic banking sector could continue to operate without state support. “We do not see any negative side effects to the reduction in anti-crisis measures,” she said, adding that the regulator planned to withdraw the looser regulatory rules from July 1.
Russian banks will need to create additional provisions, according to Nabiullina, because 2-3% of the loan portfolio can still turn into bad debts. Nonetheless, the Central Bank does not see any debt related problem in the Russian banking system. The regulator might even consider toughening consumer loan regulations, Nabiullina said.
Meanwhile, S&P Global Ratings warned last month that Russian banks could lose between 1.4 trillion and 1.6 trillion rubles in net interest income in 2021-2022 due to “narrower interest margins linked to low interest rate ”. The agency estimated that the net interest margin could drop 50 to 75 basis points this year to an all-time low of 3.25 to 3.5 percent, and an additional 25 basis points in 2022. Nabiullina a confirmed that Russian banks had lost 20 basis points. in their margin last year and warned that the decline could deepen further amid low interest rates.
At the last meeting on February 12, the Bank of Russia kept its key rate at an all-time low of 4.25 but announcement that he did not plan to cut rates further. The rate should be gradually raised as soon as inflation stabilizes near its target of 4%. The regulator plans to switch its monetary policy to a neutral rate in the next three years. He could also revise his estimate of the neutral rate, which is currently set at 5-6%.
By Anna Litvina
Sports
