17 Apr 2020 13:28

CBR sees no need for govt to recapitalize banks - Nabiullina

MOSCOW. April 17 (Interfax) - The Central Bank of Russia (CBR) does not expect such major stress for the banking system in the current crisis as there was in 2014, and the regulator believes it is unlikely that the government should need to recapitalize banks.

"We do not expect major stress for the banking system and margin contraction as was the case, for example, in 2014. Yes, there will be a decrease in banks' profit, and there will be an increase in reserves for assets, because there will be a deterioration in the quality of assets; it could not be otherwise in such conditions. However, the restructuring of loans that are underway will allow many borrowers to support, maintain their future creditworthiness. In part, the reserves will be created a little later, and we gave a lag in time so that banks do this gradually. Commission income will be reduced; we have already talked about this. Of course, interest income will also be reduced; however, such a blow to the interest margin as it was in 2014-2015 could not happen," the CBR Governor Elvira Nabiullina said during an online press conference.

The bank governor also said that the situation would affect profits; however, overall, the bank believes that, "the banking system will still have profit."

"Last year, there was a record profit, and we advised banks not to pay dividends yet, to delay these decisions for the time being; this profit could also be a source of bank capitalization. Moreover, we believe that this year, albeit to a lesser extent, but banks will still generate profits, and banks will be able to maintain their capital in the current conditions," she said.

"We do not see thus far that there will be a need for the government to recapitalize banks," Nabiullina said.