Concerns about financial stress in the Russian banking system, which first emerged in June, continue to grow. Throughout the year, updates from banking officials and the Development Ministry periodically highlighted these pressures, noted Tatha Ghose, foreign exchange market analyst at Commerzbank.
The Russian ruble is expected to decline further until 2026
“The Central Bank of Russia (CBR) took the lead in analyzing and tracking this issue in the following months. It added 13 large companies, including systemic players in the energy sector, to its list of vulnerable companies. The combined debt of these entities has already approached 1.7% of GDP. The latest financial stability review conducted by the CBR confirms this concern, increasing the number of companies at risk to 17. The problem is clearly becoming more acute.”
“The CBR adds that a staggering 58.5% of Russian corporate debt now belongs to companies facing a rising interest burden – a notable figure as the CBR initially expected this share to reach almost 34% by the end of 2025 – a level that has been breached much sooner. While the CBR has tried to temper the news by explaining the jump with an enhanced sample size (now including 89 of the largest non-financial companies), the new report also comes amid growing concerns about the debt levels of the major state-owned railway company.”
“On the whole, this story is not new, but rather a continuation of an already noticeable trend. With a peace agreement in Ukraine looking more elusive than ever, Russian policymakers are exhausting easy solutions to get the real economy going, which was still somewhat possible during the first two years after the sanctions were imposed. Now, underlying weaker economic trends are being revealed at a rapid rate. At the same time, inflation remains too high to allow the ultra-cautious Russian Central Bank to abandon its hawkish stance and dramatically lower interest rates to support businesses. Given these increasing pressures, we expect the USD/RUB and EUR/RUB exchange rates to rise significantly from their current levels through 2026.”
