Russia’s banking system is entering an increasingly difficult period. Banks are facing a liquidity shortage, higher borrowing costs, rising levels of troubled loans, and a growing need to obtain funding through mechanisms provided by the Central Bank of Russia.
As of late September, the liquidity deficit in Russia’s banking sector exceeds 3 trillion rubles. The Bank of Russia expects the average structural liquidity deficit in 2026 to reach 4–5.2 trillion rubles.
This reflects the banking sector’s growing dependence on central bank support. To maintain liquidity, the Central Bank has been conducting large-scale operations to provide funding to banks, including through repo facilities.
At the same time, the quality of banks’ loan portfolios is deteriorating. According to the Central Bank of Russia, the share of troubled loans has approached 12%. High interest rates are increasing the burden on borrowers, particularly companies that depend heavily on bank financing.
Another warning sign is the competition among banks for household deposits. Financial institutions continue to offer extremely high deposit rates in an effort to attract and retain customers’ funds. Some special deposit offers have reached 30% or more per year.
Russian banks are also facing growing problems among corporate borrowers. High borrowing costs and weaker investment activity are increasing the risk of further growth in overdue and distressed loans.
Statements from executives of major Russian banks are also drawing attention. VTB CEO Andrey Kostin has spoken about growing uncertainty for large businesses and companies becoming more reluctant to invest in their own operations. At the same time, capital continues to flow out of Russia.
Taken together, these factors are creating an increasingly strained environment for Russia’s banking system: liquidity is becoming more expensive, loan quality is deteriorating, banks are competing aggressively for deposits, and dependence on central bank support remains high.
The most serious risk would emerge if liquidity conditions and loan quality deteriorated simultaneously. In that scenario, problems could spread from individual banks and borrowers to the broader financial sector.
Leave a comment