INVESTIGATION

The Russian Banking System between 2013 and 2020

The “purging” of the banking sector, legislative changes, nationalisation, and establishment of control
What Happened?

Over the course of seven years, in Russia:


  • The number of banks decreased by 50%.

  • Government control over assets in the financial sector rose to 83%.

  • Over 50% of cases of licence revokation were followed by the initiation of criminal proceedings.

  • Dozens of former bankers were imprisoned or forced to leave Russia.

  • The assets of banks subjected to international sanctions grew by several hundred percent.

  • The "purging" of the banking sector, together with the economic crisis, cost Russian citizens 8 trillion rubles.
What Happened?


Over the course of seven years, in Russia:



  • The number of banks decreased by 50%.

  • Government control over assets in the financial sector rose to 83%.

  • Over 50% of cases of licence revokation were followed by the initiation of criminal proceedings.

  • Dozens of former bankers were imprisoned or forced to leave Russia.

  • The assets of banks subjected to international sanctions grew by several hundred percent.

  • The "purging" of the banking sector, together with the economic crisis, cost Russian citizens 8 trillion rubles.
Why did this happen?
  • Large private organisations may be politically dangerous to the Russian state.

  • Concentration of control over financial streams among Putin's most trusted figures.
  • Corrupt motivations of the Central Bank, the Deposit Insurance Agency and the FSB in revoking banks' licences.

  • Unprofessionalism and selectivity in the Central Bank's "supervisory" function.
How did this take place?
In our report, we discussed the following:
A "perfect storm" for the Russian banking system in 2015-2016.

Legislative and regulatory changes and their impact on the banks’ operations and financial state.

By the end of 2014, a crisis situation, which can be described as a “perfect storm”, developed in the Russian economy. The same description of 2015-2016 was used by one of the bankers we spoke to.

The law on national credit ratings was passed in 2015, and it set the transition period until mid-2017, when it was still possible to use international ratings and ratings of “old” agencies. According to Moiseev, at that moment the Bank of Russia still didn’t have the procedures for domestic rating considerations, and in the absence of national rating agencies, the government had no other option but to develop “twisted” requirements in the form of the banks’ participation in the state-run program of additional capitalisation.

The Bank of Russia’s measures against excess liquidity that began in 2017 in combination with other macroeconomic factors (the Russian Finance Ministry’s borrowing on the domestic market in 2020 and growing cash holdings) led to the situation of shortage of liquidity in the banking sector in December 2020 and a record-low net surplus of 2.8 bln USD (by year-end (in 2019, this indicator was 43.2 bln USD, and in 2018 — 47.9 bln USD).

Delivery of aid to government-controlled banks and near-total lack of it for private ones.
Harsh and selective application of regulatory sanctions.
The government-owned banks required direct assistance even under the circumstances of depositors bringing them their savings, and the state depositing the budgetary funds and government-controlled companies’ resources in them. In light of this, what more can be said about the survival rate of private banks? The private banks held by the skin of their teeth, but many of them suffered pinpoint blows in the form of asset revaluation in line with the Central Bank’s internal regulations with subsequent requirement to promptly perform additional provisioning, or the inability to quickly receive a rating from a new Russian ratings agency, leaving them unable to raise liquidity.
Of course, the Central Bank lent its assistance to the crisis-ridden banks, but they were mostly government-controlled. These banks enjoyed certain regulatory exemptions and direct aid in the form of additional capitalisation. In 2014–2020, the private banks received less than 10% of the aggregate amount of aid.
Elvira Nabiullina herself admitted that the very bank resolution mechanism involving the Fund for Banking Sector Consolidation was created specifically to resolve the problems of banks that were "too big to stay as they are".
The creation of unfavourable conditions for private banks.
One of the bankers we've talked to put it more bluntly: the Central Bank began to "cut the banks off” from funding sources.
The Complete Report
Please feel free to download and consult the full report to our investigation, which includes and evaluates all our reasoning on processes and factors which impacted the Russian banking system.

We tried to keep a balance between a specialist analystical project and investigative journalism.

We hope that our investigation will be fascinating for all those who are interested in what happens in Russia, its economy and politics.
Please feel free to download and consult the full report to our investigation, which includes and evaluates all our reasoning on processes and factors which impacted the Russian banking system.

We tried to keep a balance between a specialist analystical project and investigative journalism.

We hope that our investigation will be fascinating for all those who are interested in what happens in Russia, its economy and politics.
The Complete Report
Read the Full Report
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