Banking system slowing down as economy stagnates

As reported in Russian business daily Vedomosti (2 November 2012), the growth in the banking system has slowed significantly in 2012 – according to the September statistics of the Central Bank, corporate loans have increased by only 10 per cent since the start of the year (compared to 18.6 per cent in the first nine months of 2011). Growth in corporate deposits is also down – 4.6 per cent compared to 20.1 per cent in the same period last year.

Bankers asked by the newspaper say that the situation stayed the same in October as well. Companies are reluctant to take out loans, while the level of corporate bond issues is insufficient to influence asset growth.

The bankers point to a liquidity shortfall. Banks are also cutting lending as it becomes harder to generate a profit from the business, with the Central Bank setting more stringent requirements on risk assessment.

Everything appears to indicate that the economy is stagnating, as can be seen from the behaviour of corporate borrowers, with loans taken out primarily by trading companies.

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