In the current economic conditions the Bank of Russia could face the uncontrolled departure of banks from the market, MDM Bank board chairman and former CBR deputy chairman Oleg Vyugin thinks.
"Banks will have to pile up even higher provisions after the abolishment of easier capital requirements that were introduced in December 2014. This means taking the money out of capital, i.e. banks will need more capital," Vyugin told a Banki.ru special correspondent on the sidelines of the Gaidar Forum, adding that this year the government would hardly provide capital, and this means that the banking system will get a squeeze. According to him, there's another option, namely to reduce assets in order to meet the level of available capital or, consequently, license revocation or rehabilitation may follow. It seems to him that the regulator is presently in quite a dangerous situation when the hard-to-control departure of banks from the market may get under way.
According to the expert, presently banks have the last opportunity to meet capital requirements as part of the Basel III standards that took effect on January 1, 2016, i.e. to downsize their credit portfolios. "Banks will have to do this if they lack capital," Vyugin concluded.
However, he called upon not to overestimate the effect from regulatory eased requirements which were introduced in December 2014 and abolished since the beginning of 2016 as "this is just another drop in negative trends". "This is simply the deduction of capital, the amount is modest, around 0.5% of the capital adequacy ratio," the Banki.ru interviewee said.