CBR concerned by company debt

RUSSIA / FSU POLITICS - In Brief 04 Jun 2019 by Alex Teddy
The Central Bank of Russia has voiced its anxiety in its review of financial risks over increasing debt in several major companies. This poses a danger to Russian banking. Companies are spending an average of 10% servicing debt. In 2015 it was 10.4% and when sanctions and low oil prices hit the major the economy the results were almost disastrous.Russia needs to deflate borrowing and lending. There is a bubble and as a worldwide recession appears to be in the offing this is very dangerous. Those exporting resources are particularly at risk. If demand and/or prices decrease sharply then the indebtedness of these companies' borrowing in rubles will increase drastically. That is because their export are usually linked to the USD.Since 2016 borrowing in large businesses increased by over 69%. It is concentrated in 92 major companies.CBR is thinking about introducing macroprudential safeguards such as risk coefficients for lending from now on. Making borrowing more expensive will reduce the amount that companies borrow. As of October 1 2019 new rules on consumer lending will reduce unsecured lending.

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