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Russian banks may need 10bn as bad loans mount up, says central banker

RUSSIAN banks could need a minimum of &pound;10bn in extra capital this year to offset the damage done by rocketing levels of bad loans, one of the country&rsquo;s top central bankers said yesterday.<br /><br />Alexei Simanovsky, who heads the Russian central bank&rsquo;s supervision department, said stress testing had shown that non-performing loans would force banks to raise new funds.<br /><br />&ldquo;Based on the results of the stress tests and on our assumptions (on non-performing loans), banks will need from 0.5 trillion roubles (&pound;10bn) in capital,&rdquo; he said.<br /><br />Simanovsky said that non-performing loans in the Russian banking sector, excluding industry giant Sberbank, had reached around four per cent of their credit portfolios by 1 May and could rise to 10-12 per cent by the end of 2009.<br /><br />However, the first deputy chairman of the central bank, Alexei Ulyukayev, said that Sberbank and rival Russian banking giant VTB were likely to escape the worst of the crisis.<br /><br />He said Sberbank was not likely to raise new capital via a share issue in 2009, while VTB would not do it before autumn.<br /><br />The Kremlin is using the two banks as conduits to lend into the Russian economy, with each institution collecting assets which struggling companies can use as collateral to guarantee loans.