Fitch: ‘Purge’ Could Halve the Number of Banks in Russia

The number of banks in Russia could be halved in the next four years due to a wave of “purge” in the banking sector and increasing competition, according to Fitch Ratings, as reported by the Russian portal Pogled (Vzglyad).

“Although we expect the number of banks to fall from 600 to less than 300, we believe that approximately 50 banks will be sufficient to serve the Russian economy,” Fitch writes.

The agency expects that the Russian central bank will identify problematic banks in the upcoming period, which will be shut down or subjected to financial restructuring, and that the regulators’ attention will be more focused on smaller banks rather than larger ones.

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Fitch reminds that from 2013 to September this year, 346 banks in Russia operated without a license from the central bank, and that at the beginning of 2008 there were more than 1,100 banks in Russia, while on September 1 of this year there were 532.

The Russian banking system needs further “purges,” experts agree, stating that forecasts about the exit of 300 banks from the market are entirely logical.

“The banking system has been neglected, many banking activities were overlooked, but when the country fell into crisis, banks proved to be the weakest link, unresilient to stress tests and stricter regulations. Moreover, many banks simply operated irresponsibly, taking high risks and contributing to money laundering,” says Ana Kokoreva, Deputy Director of the Analytical Department at Alpari.

“Given all the open financial holes in banks, it can be concluded that the financial system of Russia is far from healthy and the banking sector will continue to be purged for at least the entire year of 2018,” believes Artem Deev, Chief Analyst at Amarkets.