MOSCOW, July 8 (RIA Novosti) – The consequences for the Russian financial system if the crisis in Ukraine further escalates will be limited, according to a review of financial stability conducted by the Central Bank of Russia (CBR) for the fourth quarter of 2013 and the first quarter of 2014.
“The possible direct consequences for the Russian financial system if the crisis in Ukraine escalates further are limited: Russian banks’ investments in affiliated banks in Ukraine and loans to residents of Ukraine, do not exceed one percent of their active assets,” the CBR stated.
The regulatory authority added that the economic situation in Ukraine is grave: the decline of production and growth of state debt are accompanied by the debt burden of non-financial organizations, worsening asset quality and a reduction in bank liquidity.
“There is a possibility that the economic issues in Ukraine might trigger a new wave of geopolitical tensions,” the CBR noted.
According to the regulator, Russian banks are acting as net lenders to Ukraine – as of April 1, 2014 loans to Ukrainian residents totaled $10.4 billion, which is less than one percent of the active assets of Russian banks, while their liabilities only stand at one billion dollars.
The Ukrainian bank sector is represented by 180 banks, of which 11 are affiliated with Russia, including four that are listed in the top twenty largest banks in the country. In total, banks relying on Russian capital control up to 13 percent of the Ukrainian banking system.
The CBR underlined that major Russian lenders are now more conservative in terms of issuing new loans to Ukrainian borrowers, which may limit the influence of the Ukrainian crisis on Russian-affiliated banks.