MOSCOW, September 12 (RIA Novosti) – Tougher EU sanctions will not affect the stability of Russian banks, even though sanctions could limit the growth of financing arrangements, former Deputy Chairman of Central Bank of Russia said.
"These [Russian] banks have a certain debt, which must be returned from international credits which would reduce the dynamics of the banks' funding. Accordingly, it will restrict the growth of the balance (available) for lending. Capital efficiency can drop, profitability that is. These are the effects, but the stability of the banks, their ability to function is, of course, unaffected," Oleg Vyugin said.
Nevertheless, the sanctions’ impact on borrowers could be painful due to increased interest rates. "This is what we are seeing in the market now," Vyugin explained.
The former Central Bank official noted that Russia will try to replace the funding with Asian markets but their potential is lower than the European and American ones and it will be hard for Russian companies to break into this market.
On Friday, the European Union tightened access to the European capital market for Russian state-owned banks. Investors from the EU are prohibited from issuing new loans to the five largest Russian financial institutions - Sberbank, VTB, Gazprombank, Rosselkhozbank and Vnesheconombank - for more than 30 days, as well as buying their stocks and bonds of new issues with the circulation term of more than 30 days. Previously, the deadline was set at 90 days.
