A systemic crisis occurs when bad assets reach. A systemic banking crisis has begun in Russia. Massive banking crisis

A crisis is an inevitable and periodic phenomenon, but this does not make it any more pleasant. For the vast majority of investors, it is not possible to make money during a crisis, despite the variety of instruments on the market. And this is completely understandable, since the standard investment portfolio is always aimed at the growth of the market with more or lesser degree risk. Hedge funds for the most part follow the market trend - practice shows that during a crisis, such funds generally only slightly smooth out the drawdown, showing a noticeable lag in the rapid growth of the market.

Therefore, keeping part of the assets in instruments that show zero, or even better - negative to the profitable market, does not look like a bad idea, especially in times of market pessimism. In this article, I will briefly recall and slightly deepen the topic of the protective component of the portfolio, which smooths out drawdowns and, under certain conditions, can even increase the total return over the long run.

Cash (cash)

Probably the easiest defensive asset in a crisis, the one most affected by inflation, is money, which is best kept in a bank deposit to preserve value. However, it is during times of recession that the proponents of conservative methods of capital accumulation have a chance to triumph over investors in the equity markets. The reason is that during the global crisis, the purchasing power of money falls less than securities and can even grow, as was the case during the deflation of 1929-1932.

If the deposit is designed in such a way that it allows you to receive cash at any time, then liquidity is added to the advantages of this method. True, the cash of developing countries carries additional risks of devaluation, as was the case in Russia with the ruble in December 2014. Money market funds are very similar to money - in fact, they are short-term American bonds with a circulation period of several weeks to a year, yielding about 1% per annum. Sometimes some of the money is held in cash with a broker to take advantage of an opportunity to buy a heavily depreciated asset.

Gold

Unlike cash, this is the most traditional defensive asset with a pronounced negative correlation to the US market. This means that when stocks fall, gold often rises in price. There are a sufficient number of ways to invest in gold, which I described. It seems important for gold not to overestimate its trends in recent years, such as in 2000-2012. Many portfolios can be constructed even in the complete absence of gold, however, as a protective asset during a crisis, it can still make up 5-10% of all assets. One of the best ways to invest in this is a low-fee physical gold ETF.

Commodity ETFs

Commodity exchange-traded funds reflect the dynamics of prices for industrial and agricultural goods - metals, building materials, oil, wheat, sugar, etc. Commodity assets are not a good investment idea for the long term. They are subject to strong fluctuations, do not pay dividends and may have long-term negative trends. But it is during a crisis that commodity prices can be more stable than stock and bond prices. A particular example is the gold mentioned above, although other precious metals can be useful in times of crisis.

Bond ETFs

Protective asset of a conservative investor. Bonds often have a negative correlation with stocks; and if they move down in the same direction as them, then with a more modest drawdown. As an example, we can offer the iShares TIPS Bond () fund, which is capable of long-term protection against inflation, because. consists of a "ladder" of anti-inflationary US government bonds for a period of 1 to 20 years. The advantages of such a fund are a low level of risk, as well as the possibility of potential growth when issuing US money, spurring inflation.

The fund's correlation with the US market is noticeable, but still incomplete - and the drawdown in 2008/09 was about 15%, although for shares in March 2009 it reached 50%. The bond fund with the highest credit rating Vanguard Total Bond Market ETF (BND) had about 7% at all.

Since the 2008 crisis, unlike the oil crisis in 1973, was not accompanied by a burst of inflation, the behavior of TIP appeared to be close to that of US corporate bonds. But in the event of rising inflation, the fund should prove to be a more effective anti-crisis tool.

Inverse ETFs

This is perhaps the most aggressive option, especially when it comes to leveraged ETFs. An example of such a fund: UltraShort Dow (DXD), I wrote about them. Since in a growing market they will certainly go into the red, their inclusion in the portfolio is very dangerous and can only be a temporary measure, involving an approximate prediction of the beginning and end of the crisis. I wouldn't advise beginners or even experienced investors to use such funds.

Kyiv National Economic University. Vadym Hetman

Keywords

toxic bank assets, the model of management, strategic approaches, non-viable banks, optimization

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Annotation to the article

The article considers the essence of the bank's toxic assets, and suggests models for managing toxic assets. The problem of the effectiveness of methods for managing toxic assets of banks and the international experience of this process have been studied. It is shown that solving the problem of toxic assets is one of the means of solving many socio-economic problems.

Scientific article text

Overcoming the negative consequences of the financial crisis, ensuring the stable development of the country and its advancement on the path of international integration is directly related to solving the problem of "toxic" bank assets and the possibility of clearing bank balance sheets from them. D. Eliot, G. Karcheva, V. Geets, T. Girchenko, A. Dzyublyuk, L. Primostka made a significant contribution to the study of issues of management and restructuring of problem assets of banks. Separately, we note the work of I. Osadchy, V. Mishchenko, A. Tushnitsky. In official speeches by E. Rosengren, President of the Federal Reserve Bank of Boston (Fed-Boston), at economic forums on the US exit from recession after the financial crisis, attention was also focused on the importance of solving the problem of “toxic” assets: “It would be desirable to act quickly in order to bring distressed assets off bank balance sheets so that banks can once again focus on future prospects and not on past mistakes.” George Soros also believes that the active participation of all interested countries in the development of anti-crisis measures aimed at solving the problem of "toxic" assets is necessary: ​​"An international agreement on bad assets is needed, which will allow sharing the burden between all states, otherwise even more of them will suffer" . The purpose of the article is to study the foreign experience of state participation in solving the problem of "toxic" assets, as well as to search for optimal methods for managing "toxic" assets in the banking sector of Ukraine, including options for clearing banks' balance sheets from them with the least losses. Research methods include dialectical, abstract-logical, economic analysis. By "toxic assets" in foreign practice, it is customary to mean not just assets that have significantly depreciated, but those that are difficult to sell (that is, depreciated and hopeless). There are several approaches to the question of how to clean banks from "toxic" assets. The practice of repurchasing "toxic" assets can be viewed from the standpoint of the strategy underlying it - European or American. It is believed that the American strategy for the buyout of "toxic" assets consists in their complete buyout, while the European one is mainly in working with banks in general and problematic assets in particular. This article will consider examples of solving the problem of "toxic" assets of banks in the conditions of overcoming the crisis. different countries . A fairly well-known recipe in the world is the creation of a specialized institution to work with toxic assets (and sometimes liabilities) of troubled banks. The distressed assets of several banks, separately or together with adequate liabilities, can be transferred to one banking structure, which, depending on the functions and structure performed, can be called differently: bad bank (“bad”, or hospital, bank), bridge-bank (“ bridge bank, or transitional bank), a specially created agency (financial company) for managing problem assets. Starting from the 70s of the 20th century. The government's NPL mechanism was used to support the private sector in South Korea, Jamaica, Indonesia, Chile, and other countries where banking sector problems arose. Quite indicative in this regard is the example of the financial crisis in Southeast Asia, which led to significant crisis phenomena in Thailand, South Korea, Indonesia and Malaysia. Common features of almost all countries were a low level of banking supervision standards, a high concentration of loans, a significant degree of interference in the management of the banking system by the government, and others. The scenario of banking crises in Mexico and Chile occurred similar to the Asian crisis: weak banking supervision, corruption and inflation, depreciation of the currency. Thus, in the late 1970s, Chile liberalized banking and loosened restrictions on the pricing of loans without adequate changes in banking supervision. The increase in bank lending contributed to the economic recovery, subsequently inflation and interest rates rose, which, in turn, led to a revaluation of assets in many sectors of the economy. The next recession of the economy led to the bankruptcy of enterprises and the panic withdrawal of deposits by the population. The Central Bank was forced to buy back troubled foreign currency loans from banks, and subsequently other problem loans at their original cost, subject to their repurchase by banks at the expense of their future income. In Mexico in the 1980s, the authorities resorted to similar measures. In exchange for "toxic" assets, banks received government securities. If these obligations were not repaid on time, they were converted into the bank's own capital, and the deposit insurer received ownership of the bank. Subsequently, an asset management company was set up to deal with toxic loans. Measures to return problem loans included state assistance to certain groups of borrowers. At the first stage foreign banks it was forbidden to acquire Mexican banks, but subsequently the restrictions were eased, and as a result, Canadian, Spanish, British and American capital entered the Mexican banking sector. The banking system of South Korea in the 1980s 20 st. controlled by the government, was unprofitable, and its management and banking supervision were ineffective. The depreciation of the Korean won and the outflow of short-term foreign currency funds provoked a banking crisis, which immediately affected the solvency of banks. Many of them went bankrupt, there were mergers of small banks, and subsequently large problem banks, some problem banks were provided with direct government assistance. In the pre-crisis period, a special state organization (hamsa) worked in South Korea, which was engaged in the acquisition of "toxic" loans from "healthy" banks. Banks were bailed out in the post-crisis period mainly by the Deposit Insurance Corporation (KDIC), by injecting equity into banks with toxic assets. The asset purchase was funded by KDIC and debt collection obligations were transferred to the hamsa. Most of the bailed-out banks stabilized their operations, and KDIC sold its shares in their capital. However, the collection of hamsa debts was rather slow and was associated with certain bureaucratic procedures. But in general, created to quickly overcome the consequences of the global financial crisis of 1997-1998. the state company for managing distressed assets showed its high efficiency In Korea. At the beginning of the Asian crisis in the early 90s. 20 st. Indonesia's banking system was particularly vulnerable. Weak state-owned banks with inefficient management accounted for about 40% of their total number. The level of concentration of resources and dollar loans was very high, the national currency - the rupiah - was overvalued, and the legal system was corrupt. The devaluation of the currency was significant, which created serious problems for borrowers and the country's banking sector. Indonesian government and The World Bank created the Indonesian Bank Restructuring Agency (Arbi), designed, on the one hand, to provide full protection to depositors and most creditors of banks, and on the other hand, responsible for restructuring problem banks and collecting problem loans. The agency fully bought out several weak private banks (some later merged) and provided partial bailouts to troubled private banks that were considered potentially viable. So, Arbi acquired "toxic" loans from several fairly efficient banks, with the issuance of permission for them to buy back a share in the equity capital from the Agency. However, the prices of such redemption significantly exceeded the funds invested in "toxic" loans by the Agency. At the same time, the Agency acted very slowly in order to get rid of problem banks and "toxic" banking assets with the least destructive consequences for the economy, and the results of these actions should be assessed as highly effective. The practice of repurchasing the "toxic" assets of failed banks by state-owned asset management companies is also quite common in China. To stabilize leading banks, the PRC government is investing heavily in them through state-owned asset management companies until the banks become attractive to private investors. At the same time, under this scheme, problem banks do not acquire the skills to manage "bad" loans, but transfer them to asset management companies. If we give the example of Russia, then after the financial crisis of 2008, closed shares were formed there. investment funds. The funds exchanged bad loans for their securities, that is, they actually carried out collection activities. The state did not finance them. A Specialized Fund for the Accumulation and Redemption of Troubled Assets has also been created - with mixed financing (state funds plus international grants). The fund exchanged problem loans for domestic government bonds of the Russian government, assuming obligations to collect debts from the borrower in the future. So, to get rid of Russian banks from "toxic" assets, experts have identified two ways: subordinated lending to banks or the procedure for entering capital. Indicative in the context of the issues under study is the experience of the Republic of Kazakhstan. At the initiative of the Ministry of Finance of Kazakhstan, the Distressed Assets Fund was established in 2008, the purpose of which is to improve the quality loan portfolio Kazakh banks. The fund functions by buying back dubious assets of banks and subsequently manages them. The acquisition of assets is carried out at the book value, taking into account the volume of created reserves, taking into account the discount. Buybacks of questionable assets provide an opportunity to free banks' assets from toxic assets and force banks to recognize their losses. Another textbook example in dealing with "toxic assets" - the problem of many banks in the world - the banks of Ireland. Generous, but not disinterested distribution of loans for the purchase of housing by ten leading development firms turned into a debt default during the global financial crisis and a real threat of bankruptcy. The state came to the rescue. From April 1, 2010 National Agency in charge of asset management began to fulfill the duties of a repository-purgatory of "bad" assets. The government of the Republic of Ireland instructed the agency to pump out at least 20% of the loan portfolio from six problem banks, which amounted to more than 80 billion euros. The state redeemed bad debts at a discount (47%) - this measure was dubbed by banks as “hair cut”, but still, about 17 billion euros had to be allocated from the Irish budget for this purpose. The Central Bank of Ireland has set strict capital requirements: Allied Irish Banks was forced to urgently recapitalize for 7.4 billion euros, and Bank of Ireland - for 2.7 billion. The state acted proactively in order to avoid the worst case scenario - an epidemic of bank failures. However, in saving the banking system, the Irish government did not hush up the truth that the main culprit of the non-payment crisis was the banks themselves, which carried out unreasonably risky credit policy. In Spain, which is also experiencing the consequences of the financial crisis, a special bank was organized on December 1, 2012, to which other banks in the country can sell (at a discount of 20-70%) part of their own toxic assets related to the real estate market and which became “problematic” after the collapse of the mortgage market in 2008. Due to the accumulated mass of such assets, the eurozone countries agreed in June 2012 to provide Spain with 100 billion euros to recapitalize the affected banks, some of which the government had to urgently nationalize. A state-owned company called the Banking Reorganization Asset Management Society or Bad Bank first bought assets from the most “problematic” banks in Spain - Bankia, Catalunya Banc, Nova Galicia and Banco de Valencia. It was, first of all, about the real estate that went to these banks from bankrupt construction companies or individuals who were unable to repay loans previously issued to them. Banks could not sell this property on their own, and thus clear and replenish their balance sheets: there is a crisis, there is no demand for real estate. In fact, the created "Society" was, rather, not a bank, but a real estate company. Its total fund was set by the government at 90 billion euros, about half the amount that Spain's central bank valued at 182 billion euros for the country's toxic mortgages. And the total amount of potentially problematic assets of Spanish banks was estimated by independent auditors at 1.5 trillion euros. To accumulate funds, the bet was made not only on state funds, but also on the funds of private investors who are ready to become shareholders of a “bad bank”. For them, for example, a minimum income tax was set - only 1%. In addition, private investors were promised dividends at an average of 15% per annum for 15 years. The desire of the Spanish government to attract private investors and limit the state's participation in the "bad bank" is explained by the fact that bank bailouts at the expense of the state budget are unpopular among the population, which protests against the government's significant bank tutelage. As a result of the work carried out at the preliminary stage, the shareholders of the “bad bank”, in addition to the state, became relatively prosperous Spanish banks (Santander and BBVA), Insurance companies and pension funds, as well as private investors. It is important to note that the creation of a "bad bank" was one of the conditions for the eurozone countries to provide Spain with 100 billion euros to recapitalize "problem" banks. The second condition was the reorganization and reduction of the staff of problem banks. For example, Bankia reduced its staff by 25% during the year, closed about 1/3 of all its branches and minimized remuneration to top managers. Experts did not rule out the possibility of a merger of banks in the future, as well as modifications to the business model and organizational structure. The federal government of Germany in 2009 also faced the need to develop a plan to rescue the banks. Suggested support program financial sector was supposed to help banks cope with the consequences of the crisis in such a way that the state did not immediately buy up all high-risk assets and nationalize banks. Within the framework of this program, it was supposed to create the Bad Bank Light model, when the state bought up high-risk assets, and banks compensated for possible losses in the long term. In the case of launching the classic Bad Bank program, as noted earlier, the state actually buys the so-called “toxic” assets from banks that are in financial trouble and assumes all the losses of the bank. In contrast to this scenario, the Bad Bank Light program assumes a model of the so-called "light version of the bad bank." Its essence lies in the fact that the state buys high-risk assets in exchange for a bank guarantee to recover losses in the long term. In addition, over the course of 40-50 years, it is the state that will receive part of the profits of banks as compensation. Thus, there is no need to make urgent injections at the expense of public funds to ensure the liquidity of the bank. A “light version of a bad bank” is able to quickly remove some of the burden from banks. However, over the years, banks will be involved in financing their unreliable assets. Note that a similar program to support the financial sector has already been used in Germany: after the reunification in 1990, the state under the same conditions bought up the risky assets of the banks of the former GDR. Sweden has the most successful, stable and long-term experience in solving the problem of "toxic" assets. It was the first Western country to start buying back bad assets. Moreover, long before the last financial crisis - in the mid-90s. A study of the historical details of the Swedish experience revealed a number of important circumstances. Thus, a set of measures to resolve the triple crisis - production, banking and currency, involved in 1991 - 1994. government of Sweden, borrowed from the American experience. These measures not only followed from the theoretical developments of American economists, but were also coordinated by them. In the early 1980s, Sweden adopted a neoliberal model of monetarism based on the dominance of banking capital in the economy, so American economists were directly interested in successfully resolving the problem of toxic assets. The nationalization that underlay the “Swedish experience” essentially marked the complete and final destruction of the “Swedish socialism” model, which for many years served as the ideal of economists and politicians of the post-communist era. As a result, Sweden has fully adapted the neo-liberal model of financial capitalism. In 1992, the government took a number of measures that went down in history under the name of "Swedish experience in working with toxic assets", namely: 1. The decision to fully guarantee the entire banking system (114 banks). This decision, formally approved by Parliament in December 1992, provided state protection against losses to all creditors except shareholders. The guarantee was provided without any restrictions on the volume, that is, for the entire amount of possible defaults on payments. In modern economic history this is an unprecedented example. 2. To reorganize the banking system, a special department was created - the Bank Support Authority, which segregated banking assets: the "good" ones were kept on the balance sheet, and the "bad" ones were moved to a single "bad bank" (bad bank). The role of the "bad bank" was played by two specialized structures established by the Bank Support Authority - "Securum" and "Retriva". The idea was that bad loans, instead of being urgently liquidated at rock bottom prices, were restructured in a "bad bank" that could wait out the crisis and, after the debtors' solvency was restored, return the loans to the market at a decent price. Moreover, Securum and Retriva bought problematic, but not hopeless assets from banks, trying to revive them. It is important to note that "terminally ill" loans were simply written off. With banks that wished to take advantage of state support, BSA entered into an agreement under which the first tranche of losses was covered by shareholders, and subsequent losses were exchanged for the state's equity participation (represented by BSA). State intervention in private banks in Sweden resulted in the reorganization of three banks - Nordbanken, Första Sparbanken and Gota Bank. Bank Första received a loan from the state in 1991, Bank Gota - in 1992. In both cases, it was about the inability of banks to meet the government's requirement to maintain an 8% minimum working capital. The lion's share of direct cash investments went to Nordbanken, in which even before the crisis the state's share was 70%. The state bought the remaining 30% of the shares from the private shareholders of Nordbanken, restructured the bank, merged it with the Gota bank and transferred it to private hands in 1995, leaving losses almost to zero. Nordbanken and the Gota bank received 98% of all state investments. The four other largest banks in Sweden - Föreningsbanken, S-E-Banken, Swedbank and Svenska Handelsbanken - refused government assistance, finding an opportunity to increase working capital through internal reserves of shareholders and private investment. 3. Preferential lending to banks was provided by the Central Bank of Sweden (Riksbank), which also assumed obligations to cover the debt of local banks on loans received abroad. Taking measures to rehabilitate the economy, the Swedish government focused on overcoming the panic in the domestic markets of Sweden, as well as restoring the confidence of the international investment capital to the country. Both goals were achieved in the shortest possible time. First, the Swedish financial crisis was clearly local in nature and in no way destabilized either the European or American financial markets. Secondly, the volume of "toxic assets" of Swedish borrowers in absolute terms was insignificant. It is believed that the experiment was a success: Sweden emerged from the financial crisis in the first half of the 1990s with a completely restructured banking system. in the US after the 2008 crisis. also inventoryed all problem assets, then put them up for auction and exchanged for securities of the Federal Deposit Insurance Corporation at a significant discount. The concept of creating a collector bank was key to the financial stability plan (Financial Stability Plan) Obama-Geithner, adopted by the US Congress in February 2009. Overall, the US government has spent about $1 trillion to clean bank balance sheets from "toxic" assets. So, the term "toxic assets" came to the Ukrainian market from more developed financial markets, however, the underdeveloped stock market of Ukraine and the lack of trading in derivatives to some extent saved banks (unlike foreign ones) from serious problems. Ukrainian banks, in general, are faced with the need to resolve the issue of problem loans, but they are specific and differ from the concept of "toxic assets" in foreign practice. Based on the foregoing, we conclude that “toxic assets” abroad are usually understood to mean not just assets that have significantly depreciated, but those that are difficult to sell (that is, depreciated and hopeless). In the realities of the Ukrainian banking sector, "toxic assets" are, first of all, mortgage loans issued by banks. The problem of toxic bank assets in Ukraine has not yet been resolved. Tools for debt restructuring (both corporate and individuals) has not yet been used effectively. Moreover, the issues of restructuring foreign currency loans are accompanied by loud social debate and political populism. To address the issue of "high toxicity" of assets, there are the following tools: 1. Out-of-court debt restructuring. This is the introduction of the best practices of the "London approach" into Ukrainian legislation. The main goal of this approach is to reduce the losses of the creditor bank as much as possible. The main principles of the approach are as follows: 1) the creditor bank takes a benevolent position towards the borrower in a difficult situation; 2) decisions about the future of the borrower-debtor are made only on the basis of well-verified objective information that all interested parties receive; 3) the bank and other creditors jointly develop a common line on the question of whether it is possible to provide this borrower with additional financial assistance to ensure a way out of the crisis and in what form; 4) costs and losses are distributed taking into account the interests of all parties involved. Borrowers (debtors of banks) who will be able to participate in the process will have to prove that they are ready to take responsibility for repaying the debt that has arisen. The costs and commissions associated with the “recovery” often add up to a rather impressive amount, which falls on the shoulders of the debtor. These costs are very burdensome for a debtor who is in a difficult financial situation. Therefore, the creditor bank must take care that its claims are within reasonable limits and are acceptable to the debtor in the present and future. The introduction of the London Approach tools into Ukrainian practice will reduce the overall level of toxicity in banking system. Over time, the successful application of this toolkit will pave the way for the return of confidence in banks and the resumption of lending. 2. The mechanism of reorganization through specialized financial institutions after cutting the bank balance according to the Good Bank, Bad Bank system (which was discussed in detail above and is the most effective option for solving the problem of "toxic" assets) 3. Transparent conversion of mortgage foreign currency loans, in which all three parties (creditor banks, individual borrowers and the state) can share responsibility on parity terms. At the same time, the entire burden cannot be shifted to the banking sector. Taking into account the international experience in solving the problem of "toxic" assets, the following operational and tactical measures can be recommended to Ukrainian banks aimed at solving the problem of overdue debts of banks in the conditions of overcoming the crisis: Assessment of the "toxicity" of bank assets and liquidation of the portfolio of problem loans. · Complete segregation of the bank's non-core businesses and core businesses (with subsequent disposal of the bank's non-core businesses). · Review and reassessment of loan portfolios. Taking measures on loan portfolios that were most affected by the crisis (revision of limits, restructuring, new repayment schedule. Development and implementation of a plan for the financial recovery of the bank and assessment of real external pressure on the bank and its liquidity. Selection of an instrument of state support for the bank (state guarantees; partial privatization; 3) transfer of toxic assets to another bank according to the Good Bank, Bad Bank model. The implementation of these measures will allow us to review and optimize the strategies and business models of banks. it can, but it must offer the most effective solution to the problem.Five lessons can be drawn from dealing with toxic assets in different countries.Problems can be dealt with effectively if there is: 1) political will; 2) financing; 3) real expectations of the price at which "toxic" assets will be sold; 4) the regulatory framework that regulates the activities of asset management companies; 5) market transparency.

08.02.2018
Events. The Central Bank adjusted the dictionary. New concepts have appeared in the program document of the Bank of Russia. Yesterday the policy document of the Bank of Russia was published, describing plans for the development and application of new technologies in the financial market in the coming years. The main ideas, concepts and projects have already been announced by the regulator in one way or another. At the same time, the Central Bank introduces and discloses new terms, in particular, RegTech, SupTech and “through identifier”. Experts note that these areas have been successfully developing in Europe for a long time.

08.02.2018
Events. The State Duma issued a pass to Russia for capital. It was decided to repeat the one-time business amnesty. The State Duma of Russia adopted on Wednesday in the first, and a few hours later in the second reading, a package of bills initiated by Vladimir Putin on the resumption of the capital amnesty. The new act of “forgiveness” was announced as the second stage of the 2016 campaign, which was then presented as a one-time campaign and was actually ignored by the business. Since the attractiveness of the Russian jurisdiction and trust in its law enforcement officers have not increased over the past two years, now the stake is placed on the thesis that capital must be returned to the country because it is worse for them abroad than in Russia.

07.02.2018
Events. Control and supervision are customized. Business and authorities compared approaches to reform. The results and prospects of the reform of control and supervisory activities were discussed yesterday by representatives of the business community and regulators as part of the Russian Business Week under the auspices of the RSPP. Despite a 30% decrease in the number of scheduled inspections, businesses complain about the administrative burden and call on the authorities to respond more quickly to entrepreneurs' proposals. The government, in turn, plans to revise the mandatory requirements, reform the Code of Administrative Offenses, digitalize and accept reports in the "one window" mode.

07.02.2018
Events. Issuers will add transparency. But investors are waiting for additions to the meetings of shareholders. The Moscow Exchange is preparing changes to the listing rules for issuers whose shares are on the highest quotation lists. In particular, companies will be required to create special sections on their websites for shareholders and investors, the maintenance of which will be controlled by the exchange. Large issuers already meet these requirements, but investors consider it important to fix these obligations in the document. In addition, in their opinion, the exchange should pay attention to the disclosure of information to shareholders' meetings, which is the most painful issue in the relationship between issuers and investors.

07.02.2018
Events. The Central Bank of Russia gets a grasp of advertising. The financial regulator has found a new field for supervision. The honesty of financial advertising will soon begin to be assessed not only by the Federal Antimonopoly Service, but also by the Central Bank. Starting this year, as part of behavioral supervision, the Bank of Russia will identify advertisements of financial companies and banks that contain signs of violations and report this to the Federal Antimonopoly Service. If banks receive not only fines from the FAS, but also recommendations from the Central Bank, this may change the situation with advertising in the financial market, experts say, but the procedure for applying the Central Bank's supervisory measures in the new area has not yet been described.

06.02.2018
Events. Not by accent, but by passport. Foreign investments under the control of the Russians will be left without international protection in the spring. A government bill depriving investments of Russian-controlled foreign companies and persons with dual citizenship of the protection of the law on foreign investment, in particular, guarantees of freedom of withdrawal of profits, will be adopted by the State Duma of Russia in early March. The document does not recognize as foreign and investments through trusts and other trust institutions. Russian-controlled structures investing in strategic assets in the Russian Federation, the White House is still ready to consider foreign investors - but for them, as before, this only means the need to coordinate transactions with the Foreign Investment Commission.

06.02.2018
Events. Banks are not given to state structures. FAS Russia intends to limit the expansion of the public sector in the financial market. The Federal Antimonopoly Service has developed proposals to limit the purchases of banks by government agencies. The FAS plans to amend the law "On Banks and Banking Activities" and is currently working on them with the Central Bank (CB). An exception may be the reorganization of banks, ensuring the availability of banking services in areas that need it, as well as issues of the country's security. The head of the Central Bank, Elvira Nabiullina, has already supported this initiative.

06.02.2018
Events. Online audit was given a chance. IIDF is ready to support remote checks. Online auditing, hitherto a side branch of this business, which was carried out mainly by unscrupulous companies, has received support at the state level. The Internet Initiatives Development Fund invested 2.5 million rubles in AuditOnline, thus recognizing the prospects of this area. However, market participants are confident that there is no legitimate future for online audits - remote audits are contrary to international auditing standards.

05.02.2018
Events. It is recommended to refrain from legitimate transactions. The Central Bank of Russia considered the "hidden trust management" unethical. The Bank of Russia warns professional participants against using some popular, but not entirely ethical practices in relation to clients in the stock market. The schemes described in the letter of the regulator lie in the legal plane, so the Central Bank limited itself to recommendations. But in fact, the regulator is testing the application of a motivated judgment, the right to use which has not yet been legally approved.

05.02.2018
Events. Absorption will be less entertaining. The Central Bank of Russia encourages banks to reduce lending to M&A transactions. The idea of ​​the Central Bank to encourage banks to lend not to mergers and acquisitions of companies, but to the development of production takes on concrete features. The first step could be to instruct banks to form increased reserves for loans issued for M&A transactions. According to experts, this will reduce such lending, but in order for bank resources to go to the development of production, additional stimulus measures will be required.

Keywords

annotation scientific article on economics and business, author of scientific work - Khlopunova M.V.

Thing. Banking sector is an important component of any economy, and crises in it can arise for general (systemic) or internal reasons. There is no sufficiently complete definition in the economic literature. systemic banking crisis. As practice shows, representatives of leading Russian and foreign economic schools have been expressing diametrically opposed views on the fundamental causes and mechanisms for the development of banking crises for a long time. At the same time, more and more new factors are emerging, the emergence of which is often difficult to predict and which lead to banking crises. The subject of this work is the causes, patterns of development of banking crises, as well as the totality of financial and economic relations and general cause-and-effect relationships that form the conditions for their development. Goals. The purpose of the study is to identify the causes of banking crises. To achieve this goal, the following tasks were set: to explore theoretical approaches to the disclosure of the essence and classification of banking crises, as well as their features. Methodology. The study was carried out on the basis of a systematic approach using monographic and economic-statistical methods. Results. The article analyzed the points of view of various scientists regarding the causes of banking crises. The study of the features and causes of banking crises allows us to develop recommendations for increasing resilience to them. This is especially important because Russia is currently experiencing another banking crisis. Findings. In domestic and foreign literature, there are several approaches to the definition of a banking crisis. However, a strict, formal and generally applicable formulation of this phenomenon has not been developed. There are also many works devoted to identifying the causes of banking crises. There are three approaches to determining the causes of their occurrence: macroeconomic, microeconomic and institutional.

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Theoretical aspects of bank crises: Substance, classification, causes

Importance The banking sector is a crucial component of any economy, where crises may arise due to general (systemic) or internal causes. The economic literature fails to sufficiently and completely define a systemic banking crisis. The research focuses on causes, patterns of banking crises and their origination, and a combination of financial and economic relations and general cause-and-effect relations that induce them. Objectives This research aims to identify what causes banking crises. In this respect, I examine theoretical approaches to revealing the substance and classification of banking crises, and their specifics. Methods The research relies upon a systems approach and monographic, economic and statistical methods. Results I reviewed various stances of scholars concerning the origination of banking crises and their causes. I investigate the specifics and reasons for banking crises, thus making recommendations on how to increase the sector's resistance to them. It is especially important, since currently Russia is undergoing another banking crisis. Conclusions and Relevance National and foreign literature points out several approaches to the defining of banking crisis. However, there is no formal and generally accepted wording of this phenomenon. There are also many researches into causes of banking crises. It is possible to single out three approaches to determining what causes them, i.e. macroeconomic, microeconomic and institutional reasons.

The text of the scientific work on the topic "Theoretical aspects of banking crises: essence, classification, causes"

ISSN 2311-9438 (Online) ISSN 2073-8005 (Print)

THEORETICAL ASPECTS OF BANKING CRISES: ESSENCE, CLASSIFICATION, CAUSES

Maria Vyacheslavovna Khlopunova

Banking

Postgraduate Student, Department of Finance and tax policy, faculty of business,

Novosibirsk State Technical University, Novosibirsk, the Russian Federation [email protected]

Article history:

Adopted on 04/11/2016 Adopted in revised form on 04/28/2016 Approved on 05/25/2016

JEL: B01, G15, G21, G24

Keywords: bank, systemic banking crisis, banking sector

annotation

Thing. The banking sector is an important component of any economy, and crises in it can arise for general (systemic) or internal reasons. In the economic literature, there is no sufficiently complete definition of a systemic banking crisis. As practice shows, representatives of leading Russian and foreign economic schools have been expressing diametrically opposed views on the fundamental causes and mechanisms for the development of banking crises for a long time. At the same time, more and more new factors are emerging, the emergence of which is often difficult to predict and which lead to banking crises. The subject of this work is the causes, patterns of development of banking crises, as well as the totality of financial and economic relations and general cause-and-effect relationships that form the conditions for their development.

Goals. The purpose of the study is to identify the causes of banking crises. To achieve this goal, the following tasks were set: to explore theoretical approaches to the disclosure of the essence and classification of banking crises, as well as their features.

Methodology. The study was carried out on the basis of a systematic approach using monographic and economic-statistical methods.

Results. The article analyzed the points of view of various scientists regarding the causes of banking crises. The study of the features and causes of banking crises allows us to develop recommendations for increasing resilience to them. This is especially important because Russia is currently experiencing another banking crisis.

Findings. In domestic and foreign literature, there are several approaches to the definition of a banking crisis. However, a strict, formal and generally applicable formulation of this phenomenon has not been developed. There are also many works devoted to identifying the causes of banking crises. There are three approaches to determining the causes of their occurrence: macroeconomic, microeconomic and institutional.

© Publishing house FINANCE and CREDIT, 2016

As the experience of different countries shows, banking crises reflect a complex process of adaptation of the banking sector to changing macroeconomic conditions. It is difficult to name a country that has not experienced, to one degree or another, crisis situations in the banking system. According to the approach of K. Reinhart and K. Rogoff, the earliest banking crisis occurred in France in 1802. Early banking crises in emerging markets occurred in India in 1863, several times in China during 1860-1870. and in Peru in 1873.

Countries are still facing banking crises, spending a significant amount of money to fight them. According to the International Monetary Fund, since 1970 there have been more than a hundred systemic banking crises in the world. Consistency

crisis means the insolvency of most of the banking system, when for some reason most banks cannot meet their obligations to their depositors.

In domestic and foreign literature, there are several approaches to the definition of a banking crisis. However, a strict formal and generally applicable definition of this phenomenon has not been developed. The essence of the banking crisis and the causes of its occurrence were considered in their works by such foreign and domestic scientists as A. Demirguk-Kunt, E. Detragia, G. Calvo, J. Kaminsky, K. Reinhart, J. Caprio, S. Lindgren,

V.Yu. Katasonov and others.

The concept of "banking crisis" is defined ambiguously depending on the direction of the study, the nature of the analyzed factors

crisis, etc. Banking crises are initially local and represent one of the components of the financial crisis. It should be noted that Special attention in the modern theory of banking crises, they pay a distinction between situations of instability in the banking sector and a full-scale crisis of the system. Local crisis in turn affects either individual sectors of the banking system, or individual regions within the country.

According to the macroeconomic approach, a systemic banking crisis is understood as a rapidly emerging and significant deterioration in the quality of banking assets due to the impact of adverse factors of a macroeconomic, regulatory and institutional nature.

The microeconomic approach, on the contrary, explains the occurrence of banking crises by a set of causes associated with the activities of specific banks and branch networks.

According to the approach of A. Demirguk-Kunt and E. Detrajia, one can speak of a full-scale systemic banking crisis when at least one of the following conditions is met: the cost of operations to improve the situation in banks amounted to more than 2% of GDP; the share of bad loans in the total assets of the banking sector exceeds 10%; problems in the banking sector led to the nationalization of a significant proportion of banks; there was a mass panic of depositors, and, as a result, deposits were withdrawn from banks (as a result of "raids" of depositors);

emergency measures were used, such as freezing deposits, declaring long “bank holidays” (days when banks do not carry out operations); the mechanisms of the state

deposit guarantees.

The most complete definition of a systemic banking crisis can be formulated as follows. This is a crisis of the banking sector, arising from a local one and based on the domino effect, in which the accumulation of "bad debts" in a number of banks and the termination of their solvency leads to a banking panic, a massive withdrawal of deposits, a sharp reduction in lending by banks to each other, etc., when against the backdrop of developing distrust, a massive suspension of payments by banks begins, followed by a collapse payment system and financial markets.

J. Caprio and D. Klingebiel singled out three manifestations of crisis situations in the banking sector:

1) problems in one or more banks (obviously similar situation has no signs of a systemic crisis);

2) latent disruptions in the functioning of the banking system, which may exist for quite a long time (in the context of a weak system of regulation of the banking sector and supervision);

3) full-scale (systemic) banking crisis.

There is a classification according to which banking crises are distinguished by the degree of damage to the economy. Thus, in a crisis that operates at the microeconomic level, several banks may go bankrupt. However, this does not lead to a large-scale economic downturn. An example of such a crisis is the banking crisis in Sweden in 1990-1993. The liquidity crisis forced the Swedish Central Bank to invest heavily in the banking system. However, this crisis did not lead to destabilization of the country's economy.

The consequences of the banking crisis, acting at the macroeconomic level, are more devastating. A striking example is the experience of Chile (1981-1984), when the banking crisis caused a decline of 13% of GDP in 1982-1983, and most banks were nationalized.

Macroeconomic instability during the "Chilean-type" crisis did not lead to full-scale fiscal destabilization, which entails high inflation and the demonetization of the economy, which is typical of a full-scale banking crisis.

The most dangerous type of banking crisis is a hidden or latent crisis, when a significant part of the banks are insolvent, but continue to function.

One of the manifestations of the banking crisis is banking panic. The classical model of banking panic, which served as the basis for most economic and mathematical models of banking panics, was proposed by D. Diamond and F. Dubwig. This model was developed by F. Allen,

D. Gale. This phenomenon is also called "bank run". It refers to a situation where a large number of bank customers withdraw their deposits due to concerns about its solvency.

One of its dangers is that the panic can spread from one possibly really troubled bank to banks that are healthy. Since they are closely interconnected by a system of mutual obligations, the emergence of a crisis situation in one bank (especially a large one) leads to losses in others.

There are two traditional views regarding the causes of bank panics:

1. According to the first approach, the banking panic is a self-sustaining process. If depositors expect a banking crisis to occur, then the best course of action for them is to withdraw their funds from the bank. If the bank will serve customers in turn, i.e. pay off their obligations first to the depositors who were the first to demand their funds, then the desire of the depositors to be the first to appear in the bank is quite understandable. And the depositors who demanded their funds first will receive more than those who waited.

Thus, it is beneficial for depositors to withdraw their funds at the same time, thus provoking a banking crisis. In extreme cases, the bank's reserves may not be enough to pay off its obligations to depositors. On the other hand, if no one expects a crisis, then banks satisfy the needs of depositors for a return of funds at the expense of liquid assets, and there is no banking panic.

2. An alternative approach is to assume that banking panics are based on business cycles. Due to the economic downturn, a decrease in the value of a bank's assets increases the likelihood that banks will not be able to meet their obligations. If depositors expect the banking sector to face financial difficulties, they will try to withdraw their funds, thus hastening the onset of the crisis.

Banking crises can be divided into four chronological periods.

1. Gold standard era 1880-1913 First of all, the crisis of 1907 that occurred in the United States should be mentioned here. In terms of international scope and cruelty, it was probably the strongest of the entire period under review. At that time, the United States did not yet have central bank, and therefore J.P. took over the fight against the crisis. Morgan, head of the J.P. Morgan Co. He lent large sums of his own funds to a group of banks as a highly concessional loan and persuaded other New York bankers to do the same to strengthen the banking system.

2. Interwar period 1919-1939 During the period under review, the Great Depression of the 1930s is the strongest economic recession. The stock market crash in October 1929 is considered the beginning of the Great Depression, a protracted global economic crisis that was finally overcome only after World War II. The US economy was particularly hard hit by the crisis. Following the stock exchange came the collapse of the banking system. Since many banks gave loans to investors to buy shares, they lost a lot of money. During the Great Depression of 1930-1933. the worst series of banking panics in US history. Trying to save their money, depositors began to hastily withdraw deposits. Naturally, this accelerated bankruptcy. Banks tried by any means to stop issuing deposits. During the crisis, more than a third of American banks went bankrupt.

3. Bretton Woods period 1945-1971 At this time, there is relative calm. Banking crises were almost non-existent with tight regulation of the banking system and control over capital flows. Since the early 1970s the process of liberalization spread to the financial sector and, above all, to banks, which for a long time belonged to the most regulated areas not only in developing countries, but also in many developed countries. The collapse of the Bretton Woods system and the energy crisis of 1973 were the catalysts for a global recession that led to difficulties in the financial sector in many advanced economies.

4. The modern period since 1971 The years since the early 1970s can be called unprecedented in terms of volatility in the prices of goods, currencies, real estate and securities. In 1 9 8 0-early 1990s. a wave swept through the Scandinavian countries

banking crises after a surge in real estate and stock prices. Similar events in Thailand had a domino effect and led to a sharp drop in stock prices throughout the region. In the second half of the 1990s. US stock markets suffered the same fate; Dot-coms and other high-tech stocks rose the most.

Banking crises of the 1990s in time began to coincide with currency crises. So, in the period 1970-1980. out of 25 currency crises, only three were accompanied by crisis events in the banking sector. However, after 1985, every second currency crisis (28 out of 52) coincided with a crisis in the banking sector.

In 1999, G. Kaminsky and K. Reinhart, in their article "Double Crises: Causes of Banking Crises and Balance of Payments Crises," point to the connection between crises and financial liberalization. In 18 of the 26 cases they studied, banking crises occurred in countries where the financial sector had been liberalized in the previous five years. Only in a small group of countries (such as Canada) did financial sector liberalization proceed smoothly.

The Russian banking system has experienced five banking crises over the past twenty-five years: the systemic banking crisis of 1995, the crisis of 1998, the banking panic of 2004, and the financial and economic crisis of 2008-2009, which began in the United States and soon became global. scale.

To date, a large number of works have been written about the 2008 crisis. In an effort to get as much money from borrowers as possible, banks have developed and applied complex tools based on mortgage loans. At that time, such a financial instrument as securitization became widespread, when mortgage-related securities were collected in packages, then other packages of securities were formed from them, and these packages were sold to investors around the world. This helped turn illiquid auto loans, home mortgages, and credit card debt into liquid, transferable fixed-income securities.

Banking crises are initially local. They begin with a series of problems in individual banks. Lack of funds, conflict of interests of owners and

managers, gaps in the legal framework or institutional structure, and other reasons can trigger a chain reaction (domino effect). Three approaches can be distinguished in determining the causes of banking crises: macroeconomic,

microeconomic and institutional.

So, for example, the emergence of crisis situations in banks may be the result of errors in the field of supervision. But, as a rule, this is not the only reason, because. first there must be some defect in the work of the banks, which escaped the due attention of the controllers. Inadequate infrastructure in accounting, law, etc. nor is it the direct and sole cause of the banking crisis. However, accounting or auditing deficiencies may obscure or delay the discovery of non-liquidity and

insolvency.

The microeconomic causes of the banking crisis primarily include the poor quality of banking management. These may include an imperfect management structure that lacks clear principles of oversight and accountability, weak staffing or lack of experience as a result of high staff turnover. An employee incentive structure that leads to risky behavior can also lead to problems within the bank. There are many theories that fix the presence of information asymmetry in the lending and savings process as the main causes of banking crises.

All banks are exposed to different types of economic risks such as credit risk (defaults); currency risk (increase in uninsured bank liabilities in foreign currency); liquidity risk (mass withdrawals of deposits). Thus, any bank is exposed to the risk associated with changes in the value of its assets and (or) liabilities in the financial markets.

In accordance with these risks, within the framework of the microeconomic approach, the following causes of banking crises can be distinguished: the growth of short-term liabilities of banks in foreign currency (the concept of J. Frankel and E. Rose); an increase in the number of non-performing loans and insufficiency of own capital (V. Gonzalez-Hermosilo).

For example, a study by the Bank for International Settlements for 45 countries found that the 2008 crisis was less severe in countries with high capital adequacy ratios for banks and a lower ratio of loans to deposits accumulated in the banking system.

If banks have a large amount of uninsured debt in foreign currency, a sudden devaluation causes a sharp drop in banks' equity, thereby increasing the vulnerability of domestic

banking sector.

Among the factors indicating the emergence of a crisis situation in banks, one can single out a large share of non-performed loans and the poor quality of the loan portfolio, a decrease in the value of the bank's assets, an imbalance in the bank's assets and liabilities by maturity and currency, a drop in the value of collateral that secures an overdue loan, a sharp outflow funds of depositors and creditors and, as a result, a reduction in funding.

Researchers J. Caprio and D. Klingebiel link the occurrence of crises in the banking system with the complete or partial loss of their net capital by banks as a result of a sharp increase in the amount of overdue debt. R. Levin, S. Lindgren and G. Kaminsky saw cyclical downturns in the economy, declining asset prices and worsening terms of trade as the main causes of banking crises.

Excessive credit expansion can also be the trigger for a banking crisis. In the works of such authors as P. Honohan, A. Demirguk-Kunt, as one of possible causes banking crises are the earlier emerging credit booms.

Among the causes of crises in banks, one can also point out the problem of moral hazard. According to some scientists, introduced after the Great Depression of the 30s. the deposit insurance system does not reduce, but rather increases the likelihood of banking crises. This is due to the fact that the deposit insurance system reduces the likelihood of bank panics and at the same time encourages banks to take on increased risks. Since insured depositors are confident that they will not suffer losses in the event of a bank failure, they do not withdraw their deposits when it is suspected that the bank

too risky. As a result, banks whose deposits are insured enter into transactions with increased risk.

The cause of the moral hazard problem for large banks is the “too-big-to-fail” effect (“too big to fail”). This is because financial institutions, which due to their size can rely on the support of governments or central banks, pose a serious threat to the stability of banking systems.

Most often, banking crises are associated with macroeconomic instability. The main ideas of the macroeconomic approach to the study of the causes of banking crises are presented in the works of S. Fisher. In his opinion, the growth of the total debt of the economy leads to a decrease in the number of deposits due to the withdrawal of funds placed on deposit accounts by enterprises. This subsequently predetermines the emergence of a liquidity crisis and massive bank failures.

The works of S. Lizondo and K. Reinhart reflect the so-called "contagion" theories, according to which the spread of banking crises is the result of close intercountry banking ties, the export orientation of the economy, low level foreign exchange reserves and the general weakness of the financial system.

Banking crises often follow collapses in real estate, stocks and other asset prices (after what is commonly referred to as a "bubble"). The term "bubble" refers to the rise in asset prices in the "rush" phase of the cycle. For example, in the 1980s in Japan, there was a boom in real estate and stocks that led to a crash in the 1990s. In the second half of the 1990s. stock hype swept across America, and the subsequent depreciation of stocks was perceived

owners of large blocks of shares in Enron, MCI-WorldCom and "dot-coms" as a collapse.

The hype is always something different, but they also have some common features. Rising prices for goods, real estate or stocks are always accompanied by euphoria. During such periods, investors seek quick profits from rising asset prices rather than income based on their productive use.

Then asset prices reach their highest point, and they begin to decline. Investors,

who have acquired assets with borrowed funds, begin to sell them at a loss, because interest on loans exceeds the income from investments. Selling at a loss leads to a sharp decline in asset prices and possible subsequent market panic and a string of bankruptcies.

Banks that place their funds in equities and real estate, or lend against these assets, often come under severe pressure as their liabilities are fixed, and falling prices lower the value of their assets. Further complicating the problem of falling prices, banks in such conditions are forced to demand early repayment of loans and sell off their assets. These "bubbles" can have a devastating effect on banks and other financial institutions.

Such crises differ in mechanisms, but, in fact, their nature is the same. Every time, banks give out wishful thinking. A crisis is preceded by a rapid rise in asset prices. Analysts are convincing themselves and investors that this time the rise in prices does not represent a bubble, but a fundamental change in the economy. However, after a certain period of time, it turns out that in fact the assets are worth much less.

R. Schiller in his work “Irrational optimism. How reckless behavior rules the markets” showed the connection between economic crises and human psychology. In his opinion, the boom in the market cannot end well. He showed how people many times fell into the same

Table 1

Types of banking crises Table 1

Types of banking crisis

the same trap, thinking that this time the rise is caused by the advent of the “new economic era”, the discovery of new technologies, which means that, unlike previous cycles, it will not lead to the blowing off of the “bubble”. He is not inclined to blame either greedy investors or national banks, which spur the boom with soft credit policies, for the succession of booms and busts. The real culprit behind bubbles is irrational social psychology.

In accordance with the approach of H.F. Minsk "bubbles" in the economy are inflated due to an increase in credit volumes. In the 17th-18th centuries, when the banking business was virtually non-existent, the speculative boom was initiated

personal loans or

trade finance. wide

the expansion of lending and the growth in the issuance of debt obligations are associated with the creation of banks. In addition to the credit expansion of existing banks, emerging banks are struggling to increase market share, which leads to a rapid increase in money and credit as they face resistance from established banks that do not want to lose their market share.

Whatever the causes of banking crises, their effects not only affect the banking sector, they also extend to real sector economy, impede socio-economic development, lead to significant losses, bankruptcy of enterprises and credit institutions, depreciation or loss of deposits of citizens. As a result, this leads to a decrease in the bank's image as a socio-economic institution.

Classification feature Type of banking crisis

Microeconomic orientation

According to the degree of damage to the economy Macroeconomic orientation

full blown

Debt (loan, financial)

By origin Organic (moral, corporate)

Structural (systemic)

Local

By scale Regional

Global

According to manifestation factors Latent crisis (or hidden)

Open form of crisis

UMAKP analysts believe that a systemic banking crisis is underway in the Russian Federation, and in the next 12 months there are serious fears of its aggravation. Experts believe that the time is not far off when problem bank loans will become more than 10% of their total amount, as a result, at least one systemically important bank will need additional capitalization and assistance from the state.

The Center for Macroeconomic Analysis and Short-term Forecasting expects a systemic banking crisis in Russia by September next year. It is reported by RBC with reference to the review of the CMASF, published today. Experts believe that at the moment the probability of its occurrence has already exceeded the critical threshold - at the beginning of September, the composite leading indicator reached 0.105, while its threshold value is 0.098.

When the Systemic Banking Crisis Comes

A systemic banking crisis is understood as a situation characterized by the implementation of one of the following conditions:

1. Clients withdraw a significant proportion of funds from deposits and accounts
2. The number of problem assets among total assets is more than 10%
3. Over 10% of banks are nationalized or reorganized
4. The state carries out large-scale simultaneous capitalization of banks in the amount of more than 2% of GDP

If we talk about the last two measures, they are forced and aimed at leveling the consequences of the outflow of customer funds from banks, as well as an increase in problem assets.

CMASF analysts report that in the first quarter of 2014 cash on deposits and accounts decreased by 1.4%, while the funds of individuals decreased immediately by 3.9%. This is one of the conditions. The review says that since that time it can be considered that a systemic crisis has begun in the banking sector.

According to analysts, in the near future the share of complex assets of the entire system of banks will exceed 10%, at the moment it is a little over 8%. In addition, CMASF reports that at least one of the systemically important banks will need state assistance, since it will lose stability. The report says: "This can be achieved by analyzing the dynamics of overdue loans, as well as the capital adequacy ratios of Russian banks."

Three factors that will help the Russian banking system

At the same time, they do not assess the current situation as catastrophic, in their opinion, there are 3 factors that will help overcome the banking crisis. The first of them is that the decrease in the real effective exchange rate of the ruble has a positive effect on the banking system. Until the cut becomes drastic, the paper says it will help businesses that compete with imports regain profitability and also support exporters. In addition, the process of increasing unemployment has slowed down, as a result, the likelihood of an increase in the number of insolvent borrowers - individuals has decreased. Also, CMASF analysts draw attention to the importance of the share of loans to the population and the corporate sector in GDP: “The growth of this indicator has decreased due to the cooling of the retail lending market. Thanks to this, prerequisites are being created for stabilizing the debt burden.”

According to analysts, these three factors will soon help to end the banking crisis that has begun.