Central Bank sees no need to recapitalize large banks - Nabiullina

MOSCOW. July 25 (Interfax) - The Central Bank sees no need to recapitalize large banks due to the overhang of bad debts; the cost of risk on corporate loans is far from record highs and provisions for retail loans are, as expected, higher than normal, but this is not critical, Central Bank Governor Elvira Nabiullina said at a press conference on Friday.

"As for the risks of the banking sector situation worsening and possibility of recapitalizing banks, we see no need for the recapitalization of large banks due to some overhang or potential overhang of bad debts," she said.

She said the banking sector was also in the black, with profit of 1.7 trillion rubles for the first half of the year, enabling banks to maintain capital adequacy and bolster their capital.

"The true situation with problem loans is better than people sometimes make out. We see the cost of credit risk, that is, the average provisions for the loan portfolio. For the corporate portfolio, it is far from all-time highs - it's 0.9% in annual terms, a normal historical level for the cost of risk for Russian banks. By comparison, I remind you that it exceeded 3% in the first half of 2022. In retail, the allocations are as expected higher than the norm - 3.4%, the historical average being about 2%, but this is not critical, because coverage for bad, unsecured loans is very high at 90%," she said.

She also said coverage for home loans was lower, but collateral was good.

"We do not see any risks for banks here. Capital really is distributed unevenly across the banking sector, but this will most likely be reflected in different rates of credit growth that banks will ensure," Nabiullina said.