Russian Banks Pass Stress Tests
By Paul Abelsky
May 7 (Bloomberg) -- Stress tests by the Russian central bank show the country’s lenders can weather a slump in the price of oil to $25 a barrel, provided external debt doesn’t rise above the current level.
If Russian banks keep debt at close to 20 percent of their total liabilities, the industry can survive a collapse in the price of crude oil to $25, Bank Rossii First Deputy Chairman Alexei Ulyukayev and economist Elizaveta Danilova wrote in the May issue of the central bank’s magazine Dengi i kredit, or Money and Credit.
Russia is the world’s second biggest oil exporter after Saudi Arabia. The government has revised this year’s budget based on a $41 per barrel price for Urals crude, Russia’s main export blend. The previous budget was based on an average price of $95 per barrel. Oil traded in New York exceeded $57 a barrel today for the first time this year.
The country’s banks had external debt equivalent to 17.4 percent of liabilities at the beginning of the year, compared with 20.4 percent on Oct. 1, and 10.9 percent in 2003, the report said. Foreign-currency obligations amounted to almost 83 percent of the banks’ outstanding debt on Jan. 1. Lenders held 3.9 trillion rubles in assets as of March 1.
With debt at or below 20 percent, Russia’s lenders risk sustaining 766 billion rubles ($23.3 billion) in losses under the central bank’s scenario, while defaults by borrowers would reach 1.3 trillion rubles, Ulyukayev and Danilova wrote.
A plunge in oil prices could destabilize the industry and erode the required liquidity level if bank industry debt reached 30 percent of liabilities, according to the report. Delinquent loans would rise to above 10 percent of the total, a level the government has termed a critical “threshold.”
Crude has climbed 27 percent this year to $56.73 a barrel. Urals averaged $49.61 a barrel in April, closing at $53.84 yesterday, more than 31 percent above the $41 level predicted by the Russian government.
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