Understand the impact of the Ukraine conflict from a cross-sector perspective with the Global Data Executive Briefing: Ukraine Conflict

The financial performance of Russian banks has improved during the third quarter partially due to reduced volatility and margin recovery, Reuters reported, citing the Bank of Russia.

As of 1 November 2022, banking sector losses narrowed to $6.54bn (RUB400bn), the banking regulator said. 

In response to Moscow’s decision to invade Ukraine, several Russian banks have been excluded from the global SWIFT payments system.

Additionally, Russian banks have had to deal with restricted access to foreign currency, sharp changes in interest rates, and reduced earnings, the report said.

Russian banks reported record earnings of RUB2.4 trillion ($38.8bn) in 2021, highlighting the impact of sanctions.

This week, the central bank also said that starting on 1 January 2023, some support measures for Russian banks would be lifted and they will once again be required to release financial statements, however in a restricted manner.

“In order to prevent the accumulation of systemic risks and maintain banking sector stability in the future, it is important to revoke regulatory easing and move towards the restoration of capital buffers,” the Bank of Russia said.

According to the stress tests, the banking industry is relatively stable. “However, some banks may need recapitalisation in the event of shocks: the total amount (of capitalisation) is estimated at up to RUB0.7 trillion ($11.32 trillion),” it added.

Another impact of western sanctions on Russia is that the exodus of foreign companies from Russia poses risks to financial stability. 

“Against the background of foreign companies leaving the Russian market and the problems with importing IT equipment, banks’ operational risks have noticeably increased,” the bank noted.

It has suggested that large financial organisations with adequate resources could consider developing their own independent IT solutions.