Filed Under:  U.S. & World

Russia Faces A Possibly Crippling Bank Crisis

Contributed by on February 7, 2015 at 9:19 am

Sbarbank - Moscow

MOSCOW, RUSSIA – MARCH 09, 2014: The central office of Sberbank Russian Federation in Moscow.

As the old saying goes, “When it rains, it pours.” Russian leader Vladimir Putin definitely has his hands full. Not only is the Ukraine-related EU sanctions weighing down on his nation, but the price of oil is hobbling the overall Russian economy. Russia, after all, is highly dependent on energy exports to prop up its economy. As much as Russia hates to admit it, the Russian economy is a monoculture. Accordingly, the Russian ruble has crashed against the euro and the U.S. dollar.

If this isn’t enough bad news, Vladimir Putin now has a potential banking crisis on his hands. The decline in the Russian ruble and the massive outflow of capital out of Russia are putting a lot of pressure on banks. There have been bank runs and a huge amount of withdrawals at different banks. The latest casualty is SB Bank. This is a midsized Russian bank under a lot of pressure due to cash withdrawals.

It appears that the looming banking crisis has so far been limited to smaller players in the Russian banking sector. Keep in mind that the banking sector is highly interrelated and interconnected. It is only a matter of time until larger banks get hit. Russia needs to get its financial house together soon. The clock is definitely ticking. While the Russian central bank has moved to cut interest rates to try and ease monetary flow, it remains to be seen what kind of positive effect, if any, this will have on Russia’s increasingly dicey economic prospects. Worst of all, this isn’t just a Russian problem. Any financial collapse or disaster unleashed in Russia can have tremendous consequences for the rest of the world.

Mr. Eugenio graduated with honors from the University of California at Berkeley with a degree in History. He has written extensively on financial markets ranging from gold IRA issues to commodities to tech stocks and all points in between. A veteran of the first Dot Com boom, Gene has headed venture- and angel-funded technology and media startup companies so he definitely has more than his fair share of market, technology, and finance expertise. Ever since moving to Asia, Gene has focused on assisting Internet businesses with compelling original content as well as outsourced social media outreach.

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