Russia risks facing an “explosive” banking crisis, as financial institutions have borne the brunt of the country’s war economy.
This was reported by Dengi.ua, citing a Reuters report (available here).
Why Russian Banks Face an “Explosive” Crisis
The document was prepared in recent weeks to brief European officials on the state of the Russian banking sector ahead of the adoption of a new EU sanctions package. And while banks have largely withstood sanctions pressure since 2022, the report emphasizes that non-performing loans (NPLs) and rising consumer debt pose a critical risk.
Due to the colossal costs of the war, the government is increasingly relying on banks, compelling them to issue subsidized loans to defense contractors, homebuyers, and other borrowers. According to the report’s authors, state-backed lending programs and debt restructurings merely mask the deep-seated vulnerability of the financial system.
“This situation creates the illusion of a dynamic economy, which in reality hides an explosive situation,” Reuters quotes the document as saying.
According to intelligence assessments, an economic shock - specifically, new large-scale sanctions against financial institutions - could serve as the trigger.
What Figures Point to Problems
European intelligence cites several alarming indicators that describe the realities of the Russian market:
- about 10% of corporate loans are considered non-performing (a sharp increase compared to 2024);
- some major banks reported that the share of non-performing retail loans reached 15% in 2025;
- more than 500,000 Russians declared themselves bankrupt in 2025 - nearly a third more than the previous year;
- Government programs prompted more than 13 million citizens to take out at least three loans simultaneously.
In addition, the volume of cash held outside the banking system grew by more than 17% - to 19 trillion rubles ($243 billion). This is putting immense pressure on deposit-funded institutions that finance lending.
How Russia is Responding and how Analysts Assess the Situation
The Central Bank of Russia declined to comment on the European intelligence assessments, although it had previously gone to great lengths to downplay the risks of a large-scale collapse. Regulatory officials have stated that the financial sector’s vulnerabilities are allegedly “not critical,” and that banks’ capital reserves are at their highest level in recent years.
Some independent experts are also skeptical. According to industry analysts, despite economic stagnation, the state’s total dominance and bloated defense spending mean no immediate financial catastrophe is on the horizon.As for the assumption that a new package of sanctions will instantly trigger a collapse, they dismiss it as “wishful thinking.”
What New Sanctions Is the EU Preparing?
The report was released ahead of discussions on the 21st EU sanctions package, which is scheduled to be finalized in July. European diplomats are considering stringent restrictions against banks and cryptocurrency networks, as well as drone manufacturers, oil traders, and refining companies.
The new measures could add nearly 90 more banks to the sanctions list, bringing the total number of sanctioned financial institutions to over 100 - representing more than half of all Russian financial entities connected to the international system.
Signs of impending pressure are already visible: for instance, Russia’s second-largest bank, VTB, plans to urgently increase its provisions to partially protect itself against potential multibillion-ruble loan losses.
