Russia steps in to prevent 'domino effect' in its banking sector — but confidence concerns linger

Russia steps in to prevent 'domino effect' in its banking sector — but confidence concerns linger
Russia steps in to prevent 'domino effect' in its banking sector — but confidence concerns linger

Russia's central bank moved to dismiss intensifying concerns that a brewing systemic crisis could be forthcoming on Thursday, as it said its second major bank nationalization in three weeks had prevented a "domino effect" in the country's ailing banking sector.

"We realized that it's better to isolate a bit more so that the domino effect does not arise, and according to the results of this work the domino effect is excluded, there is no risk of this," Vasily Pozdyshev, deputy governor at the CBR, told a press conference as reported by state media.

B&N Bank requires an estimated capitalization of around $4.3 billion to $6 billion, according to Pozdyshev, an amount approximately equivalent to 25 percent of the lender's balance sheet.

The failure of two major lenders in relatively quick succession has fueled anxiety over the health of Russia's banking sector, which has been hampered by an economic slowdown and Western sanctions in recent years.

In 2014, Russian regulators were jolted into action after a dramatic slump in oil prices as well as tough international sanctions for its annexation of Crimea and Russia's perceived role in destabilizing eastern Ukraine.

CNBC

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