Philipp Gabunia, a representative of the Bank of Russia, presented the Financial Stability Review for the second and third quarters of 2025 at a press conference on November 27. The review highlighted changes in key vulnerabilities facing Russia’s financial sector.
Gabunia stated that out of five previously identified vulnerabilities—credit risk in the corporate sector, household debt burden, housing market imbalances and project finance risks, structural imbalances in the foreign exchange market, and banks’ interest rate risk—two have lost prominence. “Two have recently lost prominence, and we no longer classify them as key vulnerabilities: these are structural imbalances in the foreign exchange market, and banks’ interest rate risk,” he said.
He explained that stability in the domestic foreign exchange market has improved. “The domestic foreign exchange market has largely stabilised, and ruble exchange rate volatility this year is at its lowest since 2022. First, tight monetary policy is working to ensure ruble investments remain attractive. Second, we are seeing the effects of structural factors such as import substitution and the repayment of a considerable part of external debt in previous years.”
Regarding new sanctions against Russian oil companies that could affect exporter revenues temporarily, Gabunia noted: “We know from experience that it takes several months before sales and settlement channels adjust, after which a recovery typically follows. We do not therefore anticipate problems in the foreign exchange market.”
On banks’ interest rate risk, he said: “The sector has shown this is manageable, even in a high-rate environment. In some measure, banks were helped by floating-rate loans, and in part by subsidised lending programmes. The banking sector’s margin now remains stable as rates are declining.”
Corporate credit risk remains a central concern due to economic slowdown and high interest rates. Gabunia outlined challenges including lower export industry revenues from sanctions and commodity price drops but said most firms can service their debts: “While most of them have no difficulty servicing their debt, they now have less potential for further borrowing. Some are struggling where operating profit is less than interest due. However, the share of their debt remains low.” He added that small businesses face growing bad loans but not to a systemic degree.
To address rising corporate leverage among large companies seeking more loans recently, Gabunia announced regulatory action: “We have introduced a twofold increase in the risk weight add-on applied to incremental debt of major overleveraged companies effective from 1 December… This add-on can be further increased if necessary.”
In retail lending trends, there has been improvement: “We note a decline in households’ Debt Service-to-Income (DSTI) ratio for bank loans. First, households are taking out fewer loans. Second, incomes have grown at a sustainably high pace.” However, there is growth in microfinance loan exposure.
Gabunia mentioned concerns about unsecured consumer loan quality: “The share of non-performing unsecured consumer loans has grown since the beginning of this year by almost 4 pp to 13%… Nevertheless, the share of non-performing loans is still below its all-time high.” He said current loss provisions would allow banks to cover 120% of outstanding non-performing loans.
Mortgage lending supported housing market stability with an increase seen after interest rates declined; however mortgage loan quality slipped slightly with an NPL ratio rising from 1% to 1.7%. Most construction companies remain profitable despite some regional oversupply.
Concluding his remarks on overall financial system health: “Since the beginning of the year banks’ capital adequacy has increased to nearly 13% as of 1 October and their return on equity is 20.4%. The two indicators are comparable with the previous two years… Banks will be able to lend to the economy and support borrowers by means of loan restructuring where needed.”
“We will continue to closely monitor financial stability,” Gabunia stated.
