On Tuesday the Central bank of Russia revealed the data covering the volume of overdue repayment of debts Russians owe 30 largest banks of the country. Statistics says that in 2006 the volume of bad debts doubled. Market participants think high expansion rates of debt non-payments endanger the banking system. By January 1, 2007, the number of Russians, who failed to cancel their credits on time, increased three times, the total debt volume amounted to 33bn rubles (compared to 10bn rubles the year before).

Such drastic dynamics has occurred for the first time in this market segment. However, experts believe that figures revealed by the Central Bank of Russia don’t show a true and fair view and the real situation must be much worse, especially with banks engaged in personal loans only.

Analytics say the growing volume of bad debts is caused by the banks aggressive crediting policy. The problem is that in 2006 the uncovered credit base happened to get saturated and banks were expected to change their policy in order to make the rates of overdue repayment of debts go down. In other words, the banks must have been more careful when selecting clients meeting their requirements. But what we see now is an expanded credit risks client base. The picture is aggravated by the way banks work with trading networks, which demand a lower credit rejection rate.

Analysts are sure that the recessionary trends in the personal loan segment will go on demonstrating negative results. The Central Bank of Russia has more than once expressed its deep concern about growing credit risks in the personal loan segment. Particularly, last summer the head of the Central Bank Sergey Ignatyev promised “to go into the question earnest”, but the only thing he managed to do is obliging all the banks to expose the effective credit rate. The market participants find these measures inadequate. In Russia people willing to take a credit notice only the volume of monthly payments for a credit, but not the lending rate. In case the banks policy doesn’t change, loan debtors are unlikely to notice the effective rate, says the senior analyst for Aton-Broker Company Ruslan Batashev.

It is no wonder that goals of bankers and the Central Bank are originally different. Any bank wants to get maximum possible profits at the certain overdue rate and is not intended to minimize the overdue rate itself. Drastic cut of credit risks may result in reduction of profits. The Central Bank in its turn tries to minimize risks of the banking sector. Hence, market participants do not exclude a probable crisis of non payments, which will lead to liquidity crisis in the banking sector.

Experts have no doubts that the liquidity crisis will definitely take place in the nearest future. The solution of the problematic situation lies, according to the analysts, in diversification of retail business at the expense of the less risky segments. The said tendency has already emerged at the market, but it will be possible to assess its effect in the distant future only.

Sources:

    www.kommersant.ru
    www.lenta.ru

Olga Pletneva