|Russian Central Bank Says Credit Risks, Bubbles Are Main Threat|
|Monday, 08 February 2010|
By Paul Abelsky and Maria Levitov
Feb. 8 (Bloomberg) -- Russia’s central bank views credit risks and the possibility of an equity market bubble as the main threats to the economy, the central bank’s head of bank regulation and supervision said.
Delinquent loans at the country’s lenders, not including Russia’s biggest bank OAO Sberbank, stood at 5.4 percent of the total as of Jan. 1, Alexei Simanovsky, who heads Bank Rossii’s financial regulation division, told reporters in Moscow today. Bad debt probably won’t rise by the end of June, he said.
Non-performing loans in the world’s biggest energy exporter may climb to 20 percent of total lending this year, based on international definitions, Deutsche Bank AG analyst Bob Kommers said on Jan. 28. Investors are “underestimating” the risks and may expect too strong a recovery, he said. Banks have held back on lending, even after 10 central bank rate cuts, on concern borrowers may be unable to service their debt.
“The overall trend is toward a decline in bad loans,” Simanovsky said.
At the same time, last year’s 83 percent surge in crude oil has spurred gains in the country’s benchmark equity index. Russia’s RTS index of the country’s 50 most-traded stocks soared 129 percent last year and is up 12 percent since the end of September.
Finance Minister Alexei Kudrin warned on Nov. 25 that “speculative capital” may lead to an overheated equity market. The government wants to wean the economy off its commodity reliance and is trying to generate more sustainable growth in the domestic economy, where a revival of bank lending is needed to restore demand.
Retail lending fell 0.4 percent in January, Simanovsky said, citing preliminary data that excluded Sberbank. Corporate loans fell 0.3 percent in the month, he said.
Bank Rossii is forcing lenders to build up bigger buffers to offset losses. The regulator on Jan. 1 raised the minimum capital requirement to 90 million rubles ($3 million). A lender’s license can be revoked if its total capital is below the required threshold for three months.
The bank may continue cutting interest rates from record lows as inflation ebbs, Simanovsky said today. The annual inflation rate slowed to 8 percent in January, the Federal Service of State Statistics said on Feb. 4. The rate may reach 7 percent, making further rate cuts “theoretically possible,” according to Simanovsky.
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