Russian Banks Face Capital Challenge Amid Tightening Regulations

Russian banks, led by VTB and Sberbank, face challenges acquiring new capital by 2026 due to tighter capital requirements from the central bank. Despite sanctions and economic slowdown, banks posted record profits. VTB aims to meet regulation demands needing 1.7 trillion roubles, as traditional fundraising sources dwindle.

Russian banks, primarily VTB and Sberbank, will encounter significant challenges in sourcing new capital by 2026 as the central bank imposes stricter capital requirements, VTB's CEO Andrei Kostin revealed to Reuters.

Despite strong performance amid Western sanctions and ongoing conflict in Ukraine, the sector is now grappling with a slowing economy, high interest rates, and regulatory tightening. Kostin highlighted the planned regulatory changes that complicate capital calculations, making it harder to raise capital.

With the central bank gradually reinstating international Basel rules, VTB alone needs 1.7 trillion roubles ($22 billion) in the next five years to meet these requirements. Yet, the shallow Russian equity market limits fundraising options, especially without Western funds.

(With inputs from agencies.)