Published: December 9, 2013
Fitch says non-viable banks should go, but that depositor confidence must be treated carefully.
A clean-up of the Russian banking sector by the Central Bank of Russia (CBR) should raise governance standards and get rid of non-viable banks, say analysts at credit-rating agency Fitch Ratings, but could hurt depositor confidence in the short term if runs are encouraged.
So far in 2013, 27 banking licenses have been withdrawn, following 22 in 2012 and 18 in 2011. That's a positive move in an overbanked sector, Fitch says.
The firm's analysts note that after the withdrawal of licences at Bank Pushkino and Master Bank for misconduct, mid-sized banks including Smolenskiy, Project Finance and Solidarnost faced runs on their deposits. Solidarnost received financial assistance from the CBR. The case of the bank, which Fitch points out held liquid assets equal to 20% of customer deposits, shows that the central bank may need to intervene to protect customer confidence in a case of severe liquidity stress.