The central bank, however, is completely resisting the scheme and has asked the lenders to act in accordance with the Basel III regulations, a globally agreed set of measures developed by the Basel committee on banking supervision.

According to the officials, using domestic rates can help the banking sector in easing the pressure and also help them to cut the lending rates.

The central bank insists on using its own in-house ratings, rather than the ratings given by domestic agencies.

Gazprom deputy CEO, Famil Sadygov said it will be very difficult to forecast the accessibility of external market to the Russian borrowers due to political reasons and therefore the development of Russia’s own domestic ratings is necessary for the Russian banking sector.

He added, “We believe that using the national ratings would make it possible to significantly lower pressure on banking capital, having a positive impact on the cost of borrowing, both for borrowers and banks.”

According to Basel III regulation, the banks are required to bring in reforms to increase the capital buffers, a process which might strain the nation’s banking sector. Russian finance minister Anton Siluanov has instructed the central bank to prolong the process until domestic ratings can be used.

Russia formed its own domestic rating system in 2014, after the western countries started imposing sanctions on it. Russia’s use of its own ratings had led global rating agencies to cut Russia’s sovereign rating.

The post Top Russian corporates seek domestic ratings for local banks appeared first on International Finance.

Corporate loans approved by the bank decreased by 3.6 percent in the second quarter, a clear indication of a weak investment climate in Russia.

However, loans to small and medium enterprises increased by 5 percent. Retail lending also increased by 4.2 percent. Retail loans account for over 35 percent of the bank’s total portfolio. Most of these loans were provided digitally by the bank.

According to the bank’s Deputy Chief Executive Alexander Morozov, the Sberbank profit results were supported by the expansion of the retail business, and the bank’s focus on lending to small and medium enterprises. He also noted that the substantial increase in the number of digital users played a part.

The bank is also transforming itself into an online services company under Chief Executive German Gref and has a number of joint projects with Russia’s top internet company Yandex.

Russia’s largest bank also announced a deal to sell its Turkish business, DenizBank to Emirates NBD, marking the end of its foreign expansion.

“The decision to sell is due to the sanction-related restrictions and a corresponding change in the bank’s international strategy that will allow us to concentrate on further development of our ecosystem in Russia,” German Gref told the media.

The bank and an internet firm Mail.ru earlier announced that they have signed a letter of intent to launch a platform for the transportation and food delivery business. The platform based on Delivery Club and Citymobil may be valued at over $1.58 billion.

According to media reports, the Russian lender has avoided the fallout of a potential no-deal Brexit by opening a branch of its Cypriot business in the heart of London.

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The World Bank said in a report that the recent bailouts of the banks in Russia have not helped them reduce the risks due to NPAs and a lower adequacy ratio. Russia’s apex bank has closed hundreds of lenders and bailed out several others using billions of dollars.

“The banking sector remains afflicted with high concentration and state dominance,” the World Bank said in the report released early this week.

Meanwhile, a Russian court has ordered private equity firm Baring Vostok to surrender its equity stake in Russian lender Vostochny Bank in a case that has seen the jailing of the PE firm’s US founder Michael Calvey.

The court ordered Baring Vostok, one of Russia’s largest foreign investors, to transfer a 10 percent stake in Vostochny Bank, a top 30 Russian bank focused on the Russian far east, to a company owned by businessman Artem Avestisyan.

The judgement gives Avestisyan and his partners majority control of the bank before a central bank-mandated capital raising that would have diluted his stake.

Russia’s President Vladimir Putin had publicly backed the case against Barings Vostok in comments released last week.

The World Bank report on banks in Russia noted upsides for the Russian economy. The Washington-based lender said that national projects aimed at strengthening human capital and increasing productivity, if well implemented could affect Russia’s economic growth potential in the medium term.

Russia’s economy grew 2.3 percent in 2018, driven by one-off projects, buoyant energy prices, and the flow of global tourists due to the FIFA World Cup in Russia.

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