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War threatens Russian banking crisis, European intelligence report says
War threatens Russian banking crisis, European intelligence report says
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By John Irish and John O'DonnellRussia risks an "explosive" banking crisis because lenders are shouldering much of the burden of the country's war economy, a European state intelligence report seen by Reuters has warned, as the European Union readies a raft of new sanctions.The two-page document, which was prepared in recent weeks to inform European officials about the state of Russia's banks, outlines their vulnerability to further Western curbs.While Russia's banks have mostly weathered the sanctions imposed since Moscow's 2022 full-scale , the June report says deteriorating loans and growing household indebtedness create an "explosive" risk, just as the EU prepares a 21st package of sanctions it hopes to finalise in July, targeting banks and cryptocurrency networks.The Russian central bank declined to comment on the assessment, although it has recently played down the risks of a major banking crisis.With the cost of a four-year war with Ukraine draining state coffers, Russia has increasingly leant on banks to support companies and borrowers. The report says this has lumbered banks with risks, as the economy teeters.The Economy Ministry cut its gross domestic product​ growth forecast to 0.4% in 2026 from 1.3% previously and to 1.4% in 2027 from 2.8%.The intelligence report, titled "Note on the probability of a banking crisis in Russia in 2026", said banks have been pushed to give subsidised loans to defence companies, homebuyers and others. It noted that state-backed credit programmes, loan restructurings and government support masked the banks' vulnerability."The situation creates the illusion of a dynamic economy that, in reality, conceals an explosive situation which an economic shock, such as an ambitious package of sanctions against banks ... could trigger," said the report.Lending to defence firms, regional state-backed projects and homeowners has increased the amount of loans that may never be repaid, the authors said.The report estimates that 10% of corporate loans are doubtful, a sharp increase from 2024, while some major banks reported retail non-performing loan ratios as high as 15% in 2025.It also says that more than 500,000 Russians declared bankruptcy in 2025, up almost a third from the previous year, while state programmes encouraged more than 13 million Russians to take out at least three loans simultaneously.Russian central bank Deputy ...