BOFIT Viikkokatsaus / BOFIT Weekly 2020/51
Central Bank of Russia governor Elvira Nabiullina declared that the purging of unhealthy banks from the sector is essentially complete. Thanks to a consistent policy push since 2013, the number of banks operating in Russia contracted by over half during the following six years. Most affected banks lost their licences due to violations of prudential regulations or money laundering rules. Bank mergers are still relatively rare in Russia. As of beginning December, 371 banks and 40 other credit institutions operated in Russia.
This year 33 smallish banks have seen their licences pulled, including two banks just last week. While government interest subsidies and loan restructurings have brought relief to the banking sector this year, the recession could still cause havoc for small financial institutions. The November bank health forecast from economic journal Expert RA anticipates that 35 small banks will struggle next year.
Despite Russia’s relatively large number of banks even today, banking has always been fairly concentrated. Sberbank, the country’s largest bank, accounts for nearly a third of the banking sector’s total assets and holds about a third of all deposits. The twelve large banks classified as systemically important represent about 75 % of the Russian banking sector’s total assets. The remaining top-100 largest banks account for another 20 % of total assets. That leaves about 250 tiny banks that together represent about 5 % of the banking sector’s total assets. About half of these small banks operate under a “basic licence” that restricts the scope of banking and financial services they can offer their customers.
Half of Russia’s systemically important banks are either directly state-owned or owned by state enterprises. The state’s role in the banking sector sharply increased in 2017–2019, when several small and mid-sized banks were seized by the central bank, deposit insurance agency or a state enterprise. The state currently controls, either directly or indirectly, roughly 65 % of the banking sector’s total assets. The CBR is currently seeking private owners for two troubled banks it seized in recent years (Otkritie and ATB), but finding suitable buyers has not been easy.
The number of banks in Russia has declined over the past two decades
Sources: CBR and BOFIT.