RUSSIA’S BASEL III BUST
Russia may not be ready to implement the Basel III banking standards at the start of 2016, some government officials have warned.
Reports from Bloomberg over the weekend said Russian policymakers are urging the nation’s central bank to wait on implementing Basel III lending rules, the voluntary regulations aimed to mitigate banking risk.
Unnamed sources told the publication that political aides are warning that implementing the guidelines will likely exacerbate Russia’s ongoing financial struggles, which reports said were the worst the nation has seen in six years.
Basel III rules are set to come into effect at the start of the new year and are likely to lead to reduced lending to businesses, Bloomberg said. A drop in corporate financing may prolong the nation’s ongoing recession, a source noted. The concerns have led an official in Russia’s Economy Ministry to delay implementation; the aide proposed the delay at a meeting with Prime Minister Dmitry Medvedev and Bank of Russia Governor Elvira Nabiullina, which occurred this month, the source told reporters.
Bloomberg spoke with Standard & Poor’s Analyst Irina Velieva to discuss further the potentialimplications of Russia adopting Basel III standards. According to Velieva, banks in Russia are already strapped for cash.
“Most of the large banks are loss-making in the first half of 2015, and provisioning needs continue to be high,” the analyst said. “Banks will likely need more time to be prepared for this tightening,”
Fitch Ratings said last month, however, that Russia’s banks deemed by the central bank to be the nation’s 10 top “systematically important” already meet the standards as outlined by Basel III.
Another analyst, Liza Ermolenko at Capital Economics, told the publication that Russia’s current level of nonperforming bank loans is estimated at 8.5 percent, and that banks are facing major financial losses should that percentage tick up to 10. The first eight months of 2015 saw bank lending levels even out, too, according to the central bank.