Russian banking system 'in a safe place': central bank

10th August 2015, Comments 0 comments

Russia's central bank chief insisted Monday that the country's beleaguered banking system is out of danger after being battered by the economic crisis rocking the country.

"The situation in the banking system is by and large a mirror for what is happening in the economy," bank head Elvira Nabiullina told President Vladimir Putin at a meeting.

"Of course, external events have had an impact on the development of the banking system. But in general, indicators show that it is in a safe place, that the banking system is stable."

Russia entered its worst financial crisis of Putin's 15-year rule in December as plummeting oil prices and Western sanctions over the conflict in Ukraine sent the economy into a nosedive.

A sharp plunge in the ruble spurred Russians to withdraw funds for conversion into foreign currencies, and threw huge corporate debt repayments into doubt.

The central bank hiked interest rates sharply to curb the ruble's fall, stifling new lending and ramping up the rate of unpaid debts.

Authorities were then forced to close down dozens of banks judged to be too fragile, while major lenders suffered losses or eroded profits.

Nabiullina said that after several months of losses the banking sector as a whole had returned profits of some 51 billion rubles ($794 million, 724 million euros) in the first half of 2015.

The figure is way down on the profits of 600 billion rubles ($9 billion, 8.5 billion euros at the current rate) in the 12 months of last year, and 1 trillion rubles ($15.5 billion, 14.2 billion euros) in 2013.

The banking sector profited from a rebound in the ruble in the spring that allowed the central bank to cut back its rates and moved Russian officials claim the worst of the crisis had past.

A recent renewed slump in the ruble on the back of falling oil prices has seen the currency fall to its lowest point against the dollar since February, highlighting how fragile the situation remains.

© 2015 AFP

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