Nabiullina said the reasons leading to the collapse of banks in Russia
The reasons leading to the collapse of the Russian banks lie in the economic field and in law enforcement, said the head of the Central Bank Elvira Nabiullina at the meeting with members of the Association of banks of Russia.
“The main problems that we see by experience of our Supervisory activities and which lead to the collapse of both small and large credit institutions we have seen in banks that have moved to reorganize the Fund through the consolidation of the banking sector is as follows: three basic economic reasons – underestimation of the magnitude of credit risk, understatement of reserves for possible losses, overstating the value of collateral. This is the first class of reasons,” she said.
“The second is the schematic formation of capital. We started to fight it, but the theme is still there it is painted, unreal capital”, – said Nabiullina.
The third reason leading to the collapse of banks, the head of the Central Bank described the financing of the project owners. “The third is the notorious funding for business owners. We see that some banks, which were created in the 1990s and early 2000-ies, was created in order to collect funds from customers, market and Finance the business of the owners of these banks. Such a model inevitably leads to collapse, so we are monitoring this actively undertaken”, she said and advised the banks with such a model to accelerate the transition to a normal market business models.
Finally, the head of the regulator noted that there are controversial reasons for the collapse of the banks. “Of course, there are reasons leading to the collapse of banks, the odious causes that are in law enforcement. This withdrawal of assets from credit institutions and falsification of financial statements, off-balance sheet deposits. Although such cases are becoming less and less, but they are. Therefore, we continue our efforts to improve legislation and to intensify our cooperation with law enforcement bodies”, – concluded the head of the regulator.