Central Bank of Russia sees slight increase in distressed assets in banking sector; capital reserves in system large - Nabiullina

MOSCOW. July 3 (Interfax) - The Central Bank of Russia has seen an increase in distressed assets in the banking sector, though this is small, and the regulator also notes a decrease in applications for restructuring recently, Central Bank Governor Elvira Nabiullina said.

"Having all the information on banks, naturally, as the body that supervises banks, I say with full responsibility that these concerns [about the risks of a banking crisis] are absolutely unfounded. The banking system is well capitalized despite the capital being unevenly distributed across the banking system, and the capital reserve is large at 8 trillion rubles. Yes, we see a certain increase, but very insignificant, in the share of distressed assets, both in the retail and in the corporate sector, but it is small," Nabiullina said during a briefing as part of the Financial Congress of the Central Bank.

"However, this is not a problem for the banking system, because all the loans are very well covered by reserves. The level of reserves is quite sufficient, meaning that there is capital, there are reserves," Nabiullina said.

Nabiullina said that in order to prevent credit risks from occurring, the Central Bank has granted banks the opportunity to restructure loans without the need to create reserves, though only "where we see an absolutely objective restoration of normal loan servicing after rates begin to decline." Banks have taken advantage of this, though demand for this is declining.

"We have recently seen that demand and applications for loan restructuring have been decreasing in recent months. Several banks have said that they have grown, though they are decreasing in general in the banking system," Nabiullina said.