BOFIT Weekly Review 2015/34
Number of banks in Russia continues to fall
There were just 783 banks operating in Russia at the end of July, down about 10 % from a year earlier. The reduction reflects license cancellations and bank mergers. The CBR has continued an activated cleaning up of the banking sector over the past two years. It has revoked 50 bank licenses already this year. Most banks losing their licenses are small or mid-sized. In about two-thirds of the cases, licenses were withdrawn due to suspected abuses such as illegal transfers of funds or violation of money-laundering regulations. In half of the cases, the reasons cited by the CBR included financial issues such as undercapitalisation or insolvency.
Banking sector problems are also reflected in the reliance on the deposit insurance fund. The fund paid out a record of 202 billion rubles (€4 billion) to depositors last year, and another 107 billion rubles in the first half of this year. The fund’s assets have fallen from about 200 billion rubles at the start of 2013 to 30 billion rubles. The deposit insurance agency has given assurances that it can continue to compensate depositors ¬– even if its obligations to depositors of Rossiyskiy Kredit, which lost its license in July, exceed 40 billion rubles. The fund gets most of its funding from member bank payments, but when needed it can also receive state support. Last year, a significant part of the fund’s financing came from the state and the situation is expected to continue.
About 20 bank mergers have been initiated or completed since July 2014. A quarter of the acquired banks are mid-sized, and the rest are small. The buyers are mainly mid-sized banks. The markets expect more mergers ahead.
Russia’s banking sector is still quite concentrated and the largest banks are state-controlled. The five largest banks held 54 % of total assets of the banking sector at the end of July. There were 106 banks with foreign majority owners at the end of June, and those banks held nearly 13 % of banking sector assets.