Key facts
- A European intelligence report indicates Russia's banking sector faces an "explosive" crisis risk by 2026.
- The report attributes this risk to banks supporting the war economy, deteriorating loans, and rising household debt.
- Subsidised loans to defence companies, homebuyers, and state-backed projects are increasing non-repayable debt.
- The report estimates 10% of corporate loans are doubtful and retail non-performing loan ratios could reach 15%.
- Over 500,000 Russians declared bankruptcy in 2025, a nearly one-third increase from the previous year.
- The EU is preparing a new sanctions package targeting nearly 90 Russian banks.
A European state intelligence report suggests Russia's banking sector is at risk of an "explosive" crisis by 2026, largely due to the demands of its war economy. The report, prepared in recent weeks, indicates that Russian banks are increasingly burdened by deteriorating loans and growing household indebtedness, a situation masked by state-backed support programs and loan restructurings.
The intelligence document highlights that banks have been pushed to provide subsidised loans to defence companies, homebuyers, and other sectors, leading to an increase in loans that may not be repaid. The report estimates that 10% of corporate loans are now considered doubtful, a significant rise, and some major banks are facing retail non-performing loan ratios as high as 15%. Furthermore, over 500,000 Russians declared bankruptcy in 2025, a nearly one-third increase from the prior year, with state programs encouraging millions to take out multiple loans simultaneously.
Despite these warnings, the Russian central bank has largely downplayed the risks, with Deputy Governor Filipp Gabunia stating that financial sector vulnerabilities are not critical and that banks' capital cushions are at a three-year high. Corporate bad loans have remained stable at 4% over the past 18 months, according to central bank figures.
Experts like Chris Weafer of Macro Advisory express skepticism about the immediate impact of new sanctions, noting Russia's resilience and the role of defence spending in maintaining employment and wages. He suggests that Asia's continued engagement with Russia limits the effectiveness of Western sanctions.
The European Union is reportedly preparing its 21st package of sanctions, which could target banks, cryptocurrency networks, drone production, oil traders, and refiners. This would add nearly 90 banks to the existing sanctions list, potentially impacting over half of Russia's internationally connected lenders. However, enforcing sanctions has historically been a challenge for Europe, and the U.S. has previously eased some restrictions under President Donald Trump.
Signs of increasing pressure are emerging, with Russia's second-largest lender, VTB, planning to boost reserves. Central bank data also shows a significant year-on-year increase in cash held outside banks, which puts pressure on lenders reliant on deposits. Sberbank's CFO noted that while initial sanctions in 2022 caused stress, many clients have since adapted.