The 12 largest Russian banks in 2016 risk losing 3.4 trillion rubles, if oil prices falls to $25 per barrel, GDP will fall to 5.7%, and the dollar will rise to 88 RUB evidenced by the results of the stress tests the Bank of Russia, cited by the IMF in its report of 23 September.
The drop in oil prices to $25 incorporated in one of two scenarios the stress tests of the Central Bank. In case of realization of the stress scenario (V-shape, is characterized by a relatively strong and rapid drop in GDP with a pronounced single failure and the subsequent rapid recovery to previous levels) — fall in oil prices to $19 per barrel, the GDP contraction of 7.8% and a rise in price of dollar to 100 rubles the amount of losses will increase to 3.75 trillion rubles.
The amount of losses include losses from credit risk (they account for a large part), as well as from market risk, risk liquidity, interest rate exposures, the capital deficit and other indicators.
Earlier on Friday, the Chairman of the Central Bank Elvira Nabiullina said that the recently conducted stress tests of the banking system showed that it will withstand oil prices at $25 per barrel is better than six months ago. “We just recently conducted an interim stress testing on the price of oil $25 per barrel. There are annual, semi-annual, we spent. According to our estimates, there is some lack of capital, but it will be less, than we did the stress test six months ago. This means that the stability of the banking system is restored,” she said.
The press service of the Central Bank on Friday, September 23, refused to comment on the data presented in the IMF report.
The Central Bank carries out a comprehensive assessment of the stability of the banking sector according to the methodology agreed with the International monetary Fund and the world Bank since 2003.
As explained in the IMF report, stress tests are divided into two groups: top-down approach (top-down), in which the controller itself does the calculations on a single methodology and approach “bottom-up” (bottom-up), in which banks are set scenarios and they independently carried out the calculations and transmit the results to the regulatory authority.
In September was held the following tests: top-down (Central Bank and the IMF), “bottom-up” (the 12 largest banks), one-way ANOVA tests (Central Bank) and liquidity (the Central Bank).
The Central Bank has tested all existing banks (considered as the 681 the Bank balances as at the end of 2015) on the basis of macroscenario, the characteristics of which were determined on the basis of estimates of the possible impact on the Russian economy, the deterioration in external economic conditions. The IMF tested the 37 largest banks.
Testing investigated the possible development of the situation under the baseline scenario and two shock.
Baseline scenario in 2016, the GDP will decline by 1%, the price of Brent crude oil of $43 per barrel, the dollar at 73 rubles, inflation of 5.5%, short term rates of 8.5% and unemployment at 6.4 percent. In the baseline scenario, the banking sector will face a capital deficit of 0.1% of GDP, which in 2020 will increase to 0.4% of GDP.
The most stressful scenario (V-shape) provides a short-term drop in oil prices to $19, GDP is 7.8%, the dollar exchange rate of 100 rubles, inflation of 15.8%, short term rates of 17.7% and the unemployment rate to 9.5%. Under this scenario, according to the Central Bank, the capital deficit of the banking sector will increase from 2016 to 2020, from 0.5 to 2.5% of GDP.
A less stressful scenario (L-shape) — the fall in oil prices to $25 and their slow recovery, the GDP is 5.7%, the dollar is at 88 rubles, inflation of 13.3%, short term rates of 15.2% and unemployment at 8.9%. In this scenario, the capital deficit will grow over the five years from 0.4 to 2.1% of GDP.
According to IMF estimates, in the medium term in terms of stress scenarios, the price of oil in 2020 will be restored to $40 and $37, respectively, and GDP growth will be 1% — 0.5 PP lower than in the baseline scenario.
“The cumulative deficit of capital in stress scenarios can not be called small, but the costs of recapitalization are manageable thanks to the small size of the banking sector relative to GDP, low debt, high amount of foreign reserves and prudent monetary policy,” reads the IMF report.
A conservative Central Bank
Tests of the Central Bank was more conservative than their own assessments of the 12 banks (bottom-up).
Central Bank expects that banks in 2016 will lose from 1.69 trillion roubles (in the baseline scenario) to 3.43 trillion rubles (in a less stressful scenario) and 3.75 trillion (most stressful). Assessment of banks more optimistic: RUB 947 bln., 2,12 trillion rubles, and 2.88 trillion rubles.respectively.
Under the baseline scenario, the Bank estimates that in 2016 with the necessity of recapitalization will face only one Bank. The Bank estimates that it will require 3 billion rubles (according to the Central Bank — 65 billion rubles).
According to the stress scenario, the Bank estimates that six banks will experience a capital deficit of 199 billion rubles, according to the Central Bank, seven banks will experience a shortage in 522 billion rubles — 2.6 times higher.
Under less stressful scenario, the Bank estimates, the scarcity of capital in two banks (70 billion rubles); estimates of the Central Bank, it will experience seven banks (426 billion rubles) is six times higher.