The Central Bank tried on the scenario of the American crisis on Russian banks

The increase in interest rates should not greatly affect the state of Russian banks, according to the Central Bank. it was he who became the catalyst for the fall of banks in the United States: their bond portfolios depreciated,

In the event of a sharp increase in interest rates, the bond portfolio of Russian banks will undergo a negative revaluation, but this "will not have a significant impact [on them]," the Central Bank wrote in the "Overview of Financial Market Risks." However, under a risky scenario, this will lead to a decrease in one of the capital adequacy ratios for eight banks.

“Inflation growth around the world has led to the transition of most central banks in developed countries to a tight monetary policy. Rising interest rates lead to a negative revaluation of the banks' bond portfolio, reflecting a loss in profitability and a lower potential amount of liquidity at the bank's disposal. A sharp outflow of deposits from the accounts of a credit institution may lead to the fact that it will not have enough current funds to cover the outflow and it will need to sell assets at market prices, which will be significantly lower than their purchase prices, ”the Bank of RUSSIA explains.

How it was in the usa

In March, three banks in the United States closed during the week - Silicon Valley Bank (SVB), ranked 16th in terms of assets and specialized in technology startups, as well as Signature Bank and Silvergate Bank, which worked with cryptocurrencies. These bankruptcies also led to a drop in the capitalization of the banking sector in the US, Europe and Asia and liquidity problems for some players. In particular, the Swiss Credit Suisse was forced to request a $54 billion loan from the Swiss NATIONAL BANK to stabilize the situation, but this did not stop the outflow of deposits. Subsequently, the bank was acquired at a deep discount by its competitor UBS with the support of the Swiss regulator.

One of the main reasons for the collapse was the increase in rates: the Fed has been fighting inflation for a year and is tightening monetary policy. The banking crisis has a negative impact on the value of long-term bonds, as their yields are no longer attractive. In the event of a raid by depositors, banks cover their obligations to them precisely by selling bonds, and the fall in the value of securities brings them additional losses. This led to a revision of the Fed's policy: although the American regulator continued to fight inflation, at a meeting in March it raised the rate by only a minimum of 0.25 percentage points.

What conclusions did the Central Bank come to

For its estimates, the Bank of Russia chose the scenario of growth in bond yields by 5 p.p. This will potentially lead to a negative revaluation of securities portfolios by 0.91 trillion rubles, but “will not have a significant impact on the banking sector as a whole and on individual credit institutions in particular”: according to the Central Bank’s calculations, not a single credit institution will break through key standards.

The second scenario that the regulator has calculated is risky: under it, as in the United States, banks will have to sell bonds that were reflected in accounts to maturity. “In this case, the overall negative revaluation of the banking system's securities portfolios will be more significant. Under this scenario, a 5 p.p. will lead to a negative revaluation of securities portfolios by 1.58 trillion rubles. As a result, only eight banks, which account for 0.62% of the assets of the entire banking sector, will have one of the capital adequacy ratios fall below the normative value,” the regulator writes.

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The Central Bank emphasizes that under such a scenario “it will be ready to support the Russian banking sector by measures to provide banks with the necessary liquidity, which have already been successfully applied during the crisis periods of 2020 and 2022.”

As for the risks of infection of Russian banks due to the problems of banks in Western countries, they are "significantly limited, since the Russian financial market is largely isolated due to sanctions and retaliatory measures of foreign exchange regulation," the Central Bank emphasizes.

“But still a sensitive channel of influence for us is a possible reduction in world prices and demand for our exports in the event of a global recession. The likelihood of such a scenario has recently increased, but is still low,” concludes the regulator.

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