According to Deputy Central Bank of Russia Dmitry Tulin, Russian banks have sufficient margin of safety. If they lose up to half of their capital, as Rossiyskaya Gazeta writes, they will be able to continue working. Such a scenario would not be something terrible and unexpected for the Central Bank of Russia.
According to Tulin, the capital in the banking sector at the beginning of 2022 was 12.5 trillion rubles ($170.06 bln). Given such a concept as a capital safety margin it is about 7 trillion rubles ($95.24 bln). This means that even with the loss of a little more than half of their capital, which may be a result of the crisis, banks will still be able to operate in the same mode, while complying with all mandatory regulations.
Last year, Russian banks received a net profit of 2.4 trillion rubles ($32.65 bln), wrote the Vedomosti newspaper, citing the Central Bank of Russia. This is a record-breaking figure. The growth in annual terms was 47%. Before the new sanctions packages were imposed on Russia, the Central Bank had predicted that the sector would make more than 2 trillion rubles ($27.21 bln) in profits this year as well. In context of the new developments, it is clear that there will be no such profits, but a certain margin of safety has been created.
Tulin said that not all banks have the same reserve of capital. In general, he estimated the stability of Russian banks at “solid B.”
Analyzing the current situation in the banking sector, Tulin admitted that the normal operation of banks after February 24 is the main result. Credit institutions continue to fulfill all their obligations. As before, all the necessary payments are made, settlements are made not only in the national currency, but also in foreign currency. Russia continues to make payments under international obligations in foreign currency, which once again confirms the stability of our banking system. Financial institutions inside the country, as usual, continue issuing cash deposits to the population.
It is quite understandable that the sanctions imposed on Russia have dealt a certain blow to the country's economy. Many foreign companies have sharply reduced their activities or have announced their withdrawal from the Russian market altogether, and naturally, the inflow of foreign currency has decreased. It should also be taken into account that Russia's gold and foreign currency reserves were also seized. In connection with all these processes, as Tulin admitted, the banking system was hit at first. The financial system seemed to be the most vulnerable to many and, as they thought in the West, a “weak target.” However, we handled this blow with success. The way the banking system overcame it all is an achievement, said Tulin in his speech at a meeting of the work group on preparation for the consideration of the annual report.
According to the Central Bank, the pressure on the financial system will only increase in the future. Changes are taking place in the economy and, therefore, it is necessary to take them into account. That is why the Central Bank and other market participants will have to work and will have to rethink and reformat approaches to regulation.
At the same time, Tulin believes that those models that were built over many years to avoid default and other financial shocks have become irrelevant at this stage. They will be replaced by other “conceptual ideas,” which at the moment the regulator is not ready to disclose, but will wait for the government's actions and cooperation with the legislative branch.
GDP will decline under sanctions pressure, wrote Gazeta.ru, citing the Central Bank, but our economic sectors will be able to overcome these difficulties and return to the growth. If the level of sanctions remains the same, the Russian economy will be able to “rebuild in two years,” said Alexei Kudrin, Head of the Accounts Chamber. According to him, for two years, only the first stage will take place.
Then, according to Kudrin, it will be necessary to “restructure” further for a number of years. After all, in this case, it is related to many very important processes in the economic sector, which will also require a lot of costs and cannot happen quickly. This is the import substitution of a number of goods and the development of new technologies. Along with this, of course, we will have to train not only engineers and technologists, but also workers in new professions. This is additional investment, construction of new enterprises, and an increase in the production of many essential goods. It is quite clear that such a major reformatting of the country's economic sector will require effort, time and money. However, it must be done to move away from dependence on unfriendly countries in the light of new relations, and Russia has everything to cope with these tasks.