Russian Banks Discuss Seeking Bailouts if Bad Loans Worsen

Some of Russia’s top banking executives have concluded that the quality of their loan books is much worse than what official data show and have privately discussed the prospect of seeking a state-funded bailout should the situation worsen, we’re told.

At least three lenders the central bank has identified as systemically important have considered the possibility that they may need to be recapitalized in the next 12 months. Executives have discussed internally how they would raise the prospect with the Bank of Russia if needed.

Officially, the banking system is in relatively good health and levels of bad debt remain well below what they were in past crunches the authorities managed to defuse. Yet some top bankers including Sberbank Chief Executive Herman Gref have have started flagging concerns about the prospect for the next year.

The European Union has suggested that the €400 billion ($463 billion) crisis tool it proposed this week would be financed using joint borrowing, we’re told. The EU’s executive branch’s new budget instrument for the period 2028-2034 would provide loans to countries so they can react faster to adverse events. The fund is likely to prove one of the most controversial aspects of the bloc’s budget plans, since several countries oppose pooled liabilities.