Is Russia still facing a tough banking crisis?

Now that Russian President Vladimir Putin has largely won the latest general elections of Russia’s lower house of parliament – the “State Duma” – economic issues could hit Russia’s economic headlines again as the banking crisis that started in the second half of 2014 following a sharp collapse of the Russian ruble (RUB) still brings negative consequences.

The Russian Central Bank revoked license for banking transactions from a number of Russian banks like the FPB Bank or RosinterBank recently, sending the ambivalent message that if the Russian state has decided to act strongly against weak banking structures, Russia’s banking sector might be in hot waters again.

After Russia’s military intervention in Crimea, the RUB more than halved in value against the US dollar (USD) from 30 rubles for 1 dollar to 85 rubles for 1 dollar. Since then, along with an ongoing tense situation between Russia and Ukraine, the RUB has stabilized around 62/67 despite ongoing Western economic sanctions enforced simultaneously with low oil prices at USD 45 per barrel for the WTI compared to USD 110 per barrel in mid-2014.

Analysts think that there could still be more downside for the RUB as inflation remains a main concern for the Russian economy over the medium term. However Cyceon noticed that a number of US-based analysts now see more value-investment opportunities in Russia as the country’s pulling out of recession. Moody’s wrote that asset quality will see improvements next year while S&P upgraded Russia’s outlook to “stable”.