Thursday, January 26, the issue of transition to a new model of rehabilitation of banks is actively discussed since the middle of last year, was again discussed at the meeting of the Interregional banking Council under the Federation Council. At the event, the Bank of Russia in the person of Deputy Chairman Vasily Pozdyshev has brought new arguments in support of a change of approach from the lending of sanator for the salvation of the rehabilitated banks through the Agency for Deposit insurance on the direct participation of the Central Bank in the capital of troubled players through a specially established Fund.
This time the representative of the Central Bank focused on the contradiction between the existing model and rehabilitation policy for inflation targeting in the monetary policy of the Central Bank. As pointed out Pozdyshev, Bank resolution mechanism, not varying more than ten years, now poses significant risks. “In terms of high interest rates to pay off within ten years a hole (the negative difference between assets and liabilities of the Bank. — ) for example, at 10 billion rubles. the differential rates of 10% per annum, it was necessary to give a soft loan (usually given Bank; at the rate of 0.51% per annum. —) to 16 billion rubles,” — said Pozdyshev. According to him, upon reaching targets inflation of 4% and, as a consequence, the reduction of interest rates in the credit market, respectively, to 6-7%, to close the same holes will need to issue 20 billion roubles, which is very inefficient.
Thus, he said, the current resolution mechanism comes into direct conflict with the goals of monetary policy aimed at reducing inflation. “We can’t give the investor 20 billion, so he closed the hole in the RUB 10 billion, Respectively, we must switch to a different mechanism,” — said the Chairman of the Central Bank.
In the framework of the policy of inflation targeting objective, the Central Bank’s annual inflation at the end of 2017 — 4%. And the Bank of Russia for this purpose it is steadily moving. At the end of 2016 inflation was 5.4% versus 12.9% at the end of 2015. After inflation and reduced interest rates. So, according to the Central Bank, the average weighted interest rates on ruble loans to nonfinancial organisations for the term up to one year (excluding Sberbank) from January to November 2016 (more current data, the Central Bank has not yet revealed) decreased from 13.48 to 11.88% per annum, over a year — from 13.78 to 12.19% per annum.
A dual result
Increased spending on sanitation is indeed a threat to inflation artegiovane, adds senior analyst of alpha Bank Natalia Orlova. And the threat is considerable. “We are talking about the fact that the volume of ruble emission, which is required for plugging holes, substantial,” she said. According to the Agency for Deposit insurance, which now supervises the reorganization, as of 1 January 2017, the total size of funding for financial rehabilitation of banks subject to repayment of the principal debt amounts to nearly 1.2 trln RUB. it is Obvious that with such figures the Central Bank has the task to minimize the costs of the reorganization.
Preliminary calculations show that the savings could be significant. However, their quantitative importance varies. “According to our estimates, is about 630 billion rubles spent on government reorganization only in 2014-2015, under the new approach, the savings could be up to 100 billion rubles”, — says the analyst of Raiffeisenbank Denis Poryvai. “Given the fact that the bulk of the funds for sanitation were issued when rates were high, but the loan period is extended, respectively, the amount of assistance exceed the total hole not so much, somewhere in 1.3 times. It was issued about 1 trillion rubles of credits that somewhere in the 200 billion rubles more than the total volume of the closed holes, which can be estimated at 800 billion rubles. But with the fall in interest rates, continue rehabilitation under the old scheme, state spending would be greatly increased towards the close problems with 1.3 times somewhere up to 2 times, so that the transition to the new scheme is quite logical,” — says senior Director financial institutions Fitch Ratings Alexander Danilov.
However, despite the logic proposed by the Bank of Russia explanations, a new model of rehabilitation is flawed, experts say. Unlike CBA to do the calculations they undertake, preferring to give the situation, rather a qualitative assessment. The analyst of rating Agency Moody ‘ s Elena Redko says: “to Assess to date, the new approach is difficult because of the importance of not only profitability, but also risks. Still rehabilitated banks had invested support in government securities and held them to maturity. The return on capital of Russian banks in 2016 was slightly above 9%, which, of course, the above preferential rates, which are remedial tools, but troubled banks “work” is only part of the capital remaining after the closing of the holes, so that the profitability of investments overall will be significantly lower”.
“The state, investing in capital reduces the length of rehabilitation. According to preliminary calculations, considering the average effective rate on previously executed redevelopments, it may be reduced slightly, no more than a third. However, investing in the capital, and out of this project, the state may only sell the Bank or waiting for the dividends. The effectiveness of the state investment in capital will be reduced immediately due to the outflow of liquidity, since the reorganization, in our experience, the client base is reduced from 30% to 50%, says a top Manager of a Bank-sanator. — In addition, the question arises — what next? No sane businessman would not agree to lead the Bank, which is controlled by the state”.
While some bankers doubt that even in the presence of strong reasoning by the Central Bank of the transition to the new model will be fully implemented. “With the failure of the old model, the Central Bank will have to decide what to do with the previous redevelopments. It is not excluded that old sanatory wish to return the projects that have overrated state. Then the savings may not happen at all”, — said the representative of another Bank turnaround.