Prospects for the banking sector under new conditions were discussed at the WEF

The banking sector managed to cope with the severe shock from the imposed Western sanctions, but the process of adaptation to the new conditions will be long. This is the conclusion reached by the participants of the session of the Eastern Economic Forum “Financial Sector: First Results of Transformation”.

The changes are so large-scale and deep that the adaptation of the banking sector will take more than one year, the head of VTB Andrey Kostin. “We are fundamentally changing the model of our interaction with the financial world. If, starting from the 90s, we have been integrating into the existing Western model, now we will inevitably enter a new model that will not depend only on Western currencies,” he stressed.

According to Kostin, the first half of the year was unprofitable for the banking sector, but starting from the second, the situation began to change in a positive direction. Systematic additional capitalization of the banking sector may not be required if certain regulatory measures are taken.

The losses of the Russian banking sector in the first half of 2022 amounted to 1.5 trillion rubles, said in an interview RBC Deputy Chairman of the Central Bank Dmitry Tulin.

Now we have coped with a hard shock, but the transformation is still ahead, Ilya Torosov, First Deputy Minister of Economic Development, believes. Record earnings in 2021 and a large capital buffer helped the banking sector survive this difficult stage, he recalled.

Torosov called the long investment process the main problem. There was a strong dependence on Western funding, and now it is necessary to replace it with capital from the domestic market and from friendly countries, he added.

What happened to the Russian banking sector after February 24 was expected, but only in part, the chairman emphasized “VEB.RF” Igor Shuvalov. According to him, restrictions on working with dollars and euros were not unpredictable for the state corporation, but everything went according to a tougher scenario. “But we live in the conditions in which we live. They are complex,” he admitted.

Future prospects

Now there is a clear de-dollarization and more and more transactions are carried out in rubles, Kostin noted. Banks that work with dollars and euros do not feel comfortable, which is why commissions are introduced for their storage, he stressed.

There is a lot of work to be done with friendly countries in terms of settling settlements, Kostin added. According to him, this is an important task, since the Russian economy remains open and largely based on raw materials – it is necessary to sell oil, gas, coal, and so on. He admitted that within unions such as BRICS, a certain unit of account may appear.

Earlier, in an interview with Vedomosti, Kostin proposed creating a separate structure for settlements in national currencies. In his opinion, it could be a public or private organization that is not afraid to fall under secondary sanctions.

This, according to him, is one of the mechanisms for working on settlements with friendly countries, although not the only one. There are also branches of banks, but they, the banker admits, are more dependent on the sanctions risk. “But if a structure that is aware of the risk of falling under secondary sanctions, but is ready to make calculations, this option looks the most relevant today,” he told Vedomosti.

Dollars and euros will not completely disappear, but they will not have the same value as before, Shuvalov added. At the same time, the role of the yuan and the ruble will increase, he believes.

Now more than half of the banking sector in terms of volume is under sanctions, Shuvalov said.

Whether there will be new tough sanctions is unknown, but it is necessary to act as if they will definitely be introduced, he said.

In his opinion, the entire banking sector needs to prepare to have at the same time other ways of conducting settlements on the transactions of their clients.

Kostin noted that the situation in the economy is very important for banks: there is moderate optimism here. He recalled that in March there were forecasts for a fall in Russia’s GDP by 10% in 2022. Now, according to VTB, the economic decline will be 4%, in 2023 – 1.5%, and in 2024 there will be growth. “In general, the level of 2021, we believe, can be achieved somewhere in four to five years,” Kostin said.

There are prerequisites for reducing the key rate in the near future to 7.5%, and then to 7%, which will stimulate lending, he noted.

This year, he said, the banking sector will end with a loss, since the sanctions strike cannot go unnoticed, but in 2023 profit is possible if there are no sudden shocks.