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Business Insider
18-07-2025
- Business
- Business Insider
War-weary Russian banks are reportedly eyeing state bailouts as bad loans pile up
Some big banks in Russia are reportedly getting ready to ask for an emergency bailout if their finances don't improve over the next year. Executives in at least three of the country's big banks have considered the risk that they may need to ask Russia's central bank for a bailout in the next year, Bloomberg reported this week. The banks, which the Bank of Russia has classified as critically important to the nation's financial system, have had private discussions about how to approach the central bank for a bailout, the report said, adding that the discussions were growing more urgent. The talks took place because the lenders' balance sheets look worse than what the official data suggests, Bloomberg said, citing the people and internal documents. The likelihood of asking for a bailout will depend on how many bad loans the banks continue to accumulate this year, the sources said. Stress in the banking sector is another sign of how Russia's economy has struggled to bear the costs of its war in Ukraine, though its banking system looks to be on solid footing, according to the official statistics. Russian banks took in a record 4 trillion rubles, or $50.9 billion in profits in 2024. Monthly net profits also swelled by a third in June compared to the same level last year, according to central bank data released on Friday. Russia's central bank also says the nation has a low share of bad debt overall. The share of "problem loans" to corporate borrowers stood at around 4% as of October 2024, according to the Bank of Russia's latest Financial Stability Review. The review acknowledged that the creditworthiness of Russia's corporate sector has "slightly declined," due to "serious delinquencies seriously increasing" among small businesses. Consumers are also falling behind on payments, with the share of delinquent unsecured consumer loans that were more than 90 days delinquent rising to 10.5% at the end of the first quarter. Top bankers in Russia have also expressed concern about their finances and the outlook for the coming year. Herman Gref, the CEO Sberbank, said the bank's path forward for the next year would "not be easy" when speaking to investors at a meeting in June. He pointed to the declining quality of loans and more companies restructuring their debt. "I hope, as always, we will be able to find joint plans to get through these difficult times," he said. Concerns are rising throughout Russia's economy as the Ukraine war continues through its third year. Borrowing costs remain near all-time-highs. The Bank of Russia raised its interest rate to a record 21% last year, before trimming it to 20% in June. The nation is also running a steep budget deficit and quickly depleting its rainy day fund. Liquid assets in Russia's national wealth fund dropped to 28 trillion rubles, or $35.6 billion in May, down around 71% from levels at the start of the Ukraine war, according to an analysis from the Peterson Institute for International Economics.
The Star
09-07-2025
- Business
- The Star
Roundup: BoE warns of global economic risks amid U.S. tariff hikes
LONDON, July 9 (Xinhua) -- The Bank of England (BoE) warned Wednesday that the global economy faces rising downside risks, citing escalating U.S. tariffs. In its latest Financial Stability Report, Britain's central bank highlighted that tariff hikes, particularly by the U.S., are dampening global demand and weighing on business investment decisions. Disruptions to global supply chains and geopolitical tensions are also exacerbating uncertainty around inflation, it added. "Financial markets experienced a period of significant turbulence in April following announcements by the U.S. on trade policy," said BoE Deputy Governor for Financial Stability Sarah Breeden, adding that risks and uncertainties associated with geopolitical tensions, reduced co-operation on trade and international policy, and government finances globally are still elevated. Amid the tariff threat, the report noted the vulnerabilities of global household and corporate debt vulnerabilities. "Globally, household and corporate balance sheets remain healthy in aggregate but face headwinds in the context of an uncertain economic outlook," it said. Over the past six months, one of the big economic problems and chaos has been Washington's trade policy, said Steve Nolan, a senior lecturer in economics at Liverpool John Moores University. He added that the uncertainty of the trade policy "has had massive effects" on the markets and the bonds. Nolan's remarks echoed with the report, which warns that trade policy changes create particular difficulties for corporate sectors in impacted regions, resulting in reduced profits and increased manufacturing expenses. In the euro area, the report cautioned that the steel and automotive industries in the area are "particularly export-oriented and therefore tariff-sensitive," and the automotive industry receives a large share of bank lending. According to the European Central Bank's Financial Stability Review in May, trade frictions could significantly affect the resilience of euro area firms in key export-oriented industries. Intensifying trade frictions could worsen the outlook of firms, especially in the manufacturing sector. In terms of global public sector debt vulnerabilities, the report also highlighted that public debt-to-GDP ratios are rising globally. In Britain, sectors such as manufacturing, which are heavily reliant on U.S. demand, are especially exposed, with analysts warning that falling global consumption and rising production costs could affect British companies' profitability. Noting that a new trade agreement between Britain and the United States in May has brought some relief, the report cautioned that a further escalation in trade disputes globally could amplify financial stress and drag on economic growth.
Gulf Today
21-06-2025
- Business
- Gulf Today
European Central Bank warns of sharp slowdown in global trade
The European Central Bank (ECB) has warned of a significant slowdown in global economic outlook over the next two years, attributing it primarily to US tariffs and rising uncertainty surrounding international trade policies. According to the ECB's June 2025 macroeconomic projections, global import growth is now expected to reach 3.1 per cent in 2025, down by 0.4 percentage points from previous estimates. The outlook for 2026 is more severe, with growth forecast to drop to 1.7 per cent, a sharp downward revision of 1.4 percentage points. The ECB attributes the slowdown to the impact of recent US tariff increases on various imports and broader policy uncertainty across international trade channels. On the other hand, the ECB noted several positive factors that could support the eurozone economy and enhance its resilience. These include increased government spending on defence and infrastructure, rising real household income, a strong labour market, and improving financing conditions. Meanwhile a marked spike in uncertainty across global trade, defense, international cooperation and regulation policies could prove challenging for financial stability, according to the May 2025 Financial Stability Review, published by the European Central Bank (ECB). Frequent shifts and reversals in tariff policy, alongside significant changes in the geopolitical environment, could have major economic and financial impacts. While global macroeconomic imbalances remain a long-standing issue in the policy debate, it is not clear that tariffs are the best-placed policy instrument to address them. 'Rising trade frictions and related downside risks to economic growth are weighing on the outlook for financial stability', said ECB vice president Luis de Guindos, in a statement. The significant increase in trade policy uncertainty and trade frictions triggered large spikes in financial market volatility and raised the risk of an economic slowdown. Financial markets across the globe sold off at an unsettling speed in early April, and financial conditions tightened notably. While risky assets had fully recovered their initial losses by mid-May, markets are still highly sensitive to tariff-related news. Equity markets in particular remain vulnerable to sudden and sharp adjustments as valuations are still high and concerns over risk concentrations persist. In an environment of heightened market volatility, euro area non-banks' liquidity and leverage weaknesses could be revealed, amplifying market shocks. Jo Burnham, margin expert at OpenGamma, said in emailed commentary: ' As the ECB's review highlights, growing uncertainty is fueling market volatility — a trend the shadow banking industry, in particular, must take seriously. Just last month, we saw how Washington's tariff plan triggered a wave of volatility, driving margin calls across equities, commodities, foreign exchange, and beyond. In periods of extreme turbulence, global clearing houses are demanding more collateral from their members as asset values fluctuate.' 'With markets remaining on edge there is growing need for firms to improve their operational resilience, ensuring they have the tools in place to navigate margin requirements and optimise the ways that they are met.' Amid escalating global trade tensions, the European Central Bank (ECB) has raised serious concerns about the economic fallout from a prolonged trade war. In a stark assessment delivered on April 29, ECB Executive Board member Piero Cipollone projected that the Eurozone could face notable declines in growth and investment, coupled with a disinflationary environment, if trade disruptions persist. Economic Drag from Trade Fragmentation Cipollone emphasized that the Eurozone may see business investment decline by approximately 1.1 per cent in the first year of a full-scale global trade conflict. Moreover, the region's real GDP growth could fall by 0.2 percentage points between 2025 and 2026. Additional volatility in global financial markets, which has already emerged in the wake of US protectionist policy moves, could contribute another 0.2 percentage point decline in GDP by 2025. While the impact on inflation remains ambiguous, Cipollone stressed that in the short to medium term, the consequences might be disinflationary rather than inflationary—undermining already tepid price growth across the Eurozone. These projections reinforce the market's expectations for a rate cut at the ECB's upcoming June 2025 meeting, as policymakers seek to cushion the economy against external shocks. Shift Away from a Dollar-Dominated Global System The ECB's warning also reflects broader structural changes in the global economy. Cipollone underscored the risks posed by an increasingly fragmented global trade system. As the US pursues aggressive tariff policies, the long-term effects—slower growth, persistent inflation, and ballooning public debt—could undermine trust in the dollar's dominance as the world's primary reserve and trade currency. This erosion of confidence in U.S.-led financial architecture, Cipollone warned, could accelerate the emergence of alternative regional systems and weaken global economic cohesion. Central Banks Urged to Strengthen Crisis Readiness In light of these risks, the ECB board member urged central banks to prepare for potential capital flight, payment system disruptions, and heightened currency volatility. This includes developing robust contingency plans and crisis management frameworks. Cipollone also called on G20 nations to reaffirm their commitment to open trade and resist protectionist impulses that risk triggering 'beggar-thy-neighbour' dynamics, which harm global economic stability. He suggested convening a high-level international trade summit to reinforce collective action and promote more equitable economic adjustment across countries. Policy Urgency Amid Systemic Transition As the Eurozone teeters on the edge of disinflation and slowing investment, the ECB's message is clear: the consequences of uncoordinated trade policies now extend far beyond tariffs and balance sheets. They are reshaping the architecture of the global economy itself. While short-term stimulus, such as interest rate cuts, may help buffer the impact, the deeper challenge lies in preserving international cooperation in an increasingly multipolar and protectionist world. The ECB's call for collective action may be one of the last efforts to prevent fragmentation from becoming the new normal in global trade. Agencies
IOL News
20-06-2025
- Business
- IOL News
Sarb warns of climate change woes on financial stability
As countries transition at varying paces, Sarb Governor Lesetja Kganyago said the risk of a disorderly global shift to a low-carbon economy intensified. Image: SARB/Facebook The South African Reserve Bank (Sarb) has issued a stern warning regarding the perpetual risks that climate change poses to the financial sector. In its latest Financial Stability Review (FSR) published on Thursday, the Sarb identified climate change as one of three major threats to the financial stability of the nation, alongside the looming spectre of cyber incidents and persistently low economic growth. In the review, the Sarb highlighted a growing consensus within academic and regulatory literature that climate change introduces two primary types of risks: physical risks and transition risks. Physical risks are defined as the economic losses stemming from the increasing frequency and intensity of adverse weather events, such as floods, droughts, and storms—a trend already observable in South Africa. 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Advertisement Next Stay Close ✕ On the other hand, transition risks are exacerbated by an uncoordinated global response to climate change, where financial institutions face challenges in recognising, preparing for, and complying with evolving climate-related regulations. With South Africa's financial system significantly exposed to carbon-intensive activities and assets, the bank warned that the country was particularly vulnerable to these insidious risks. Sarb Governor Lesetja Kganyago said the risk of a disorderly global shift to a low-carbon economy had intensified as countries transition at varying paces. However, Kganyago said South Africa's financial system was so far demonstrating a high degree of resilience in response to global shocks such as intensifying global conflict with the conflict in Ukraine and the escalating war in the Middle East. 'Climate change will be an abiding challenge with impacts that include risks to financial stability. Last year, we conducted a first climate risk stress test to evaluate the resilience of systemically important banks to climate-related shocks,' Kganyago said. 'The FSR provides an overview of the lessons learned from the test. We have also published a stand-alone technical report on climate risk stress tests.' The FSR introduced an overarching framework for assessing climate-related financial stability risks and vulnerabilities in the South African financial system. The framework maps the process the Sarb follows to gather relevant information and assess the residual vulnerability of the South African financial system to climate-related shocks, after accounting for existing mitigating measures. These processes aim to align the financial stability monitoring and assessment framework with international best practice. Meanwhile, the Sarb also warned about the country's cybersecurity vulnerabilities. The FRS said the convergence of rapid technological advancements, mounting geopolitical uncertainties, and a significant skills gap in the cybersecurity industry was creating an increasingly complex cyber-environment that posed substantial risks to the financial sector and beyond. The Sarb has highlighted that this technological evolution was not merely a challenge for local firms but also exacerbates the disparities between advanced economies and emerging markets like South Africa. Current reporting shows that South Africa's cybersecurity spending consistently remains alarmingly low—less than the mature market benchmark of 0.25% of GDP annually. This deficit comes despite the pressing reality of costly data breaches. In 2024, the average cost of data breaches in South Africa was $2.78 million, a marginal decrease from $2.79m the previous year, yet a figure that remains unacceptably high. Moreover, the nation's ongoing electricity-supply challenges add another layer of complexity and vulnerability to cybersecurity efforts. While improvements have been noted, inconsistent power supply poses a latent risk to digital infrastructures, exposing them to potentially devastating cyber-attacks. The Sarb cautions that many backup power systems currently in use lacked the necessary robust security protocols to guard against such threats. As for economic growth, the Sarb said South Africa was grappling with a persistent economic malaise as recent analyses revealed that real GDP growth has averaged a mere 0.54% annually since 2018. This stagnation has entrenched a series of pressing issues, including low private investment, heightened inequality, and a rising tide of unemployment that threatens the livelihoods of millions of South Africans. The economic landscape appears even murkier with the looming possibility of the non-renewal of the African Growth and Opportunity Act (Agoa) and the imposition of tariffs on South African exports. Recent findings from the Sarb's April 2025 Monetary Policy Review (MPR) illustrated the potential repercussions of such trade adjustments through three distinct scenarios.
Bloomberg
19-06-2025
- Business
- Bloomberg
South Africa Banks at Risk From Trade, War Shocks, SARB Says
Growing geopolitical tensions and global policy uncertainty are among the biggest risks facing South Africa's financial industry, the central bank said. The nation is vulnerable to spillover effects from trade-related tensions and international conflicts because of the limited extent to which it can mitigate them, the South African Reserve Bank said in its biannual Financial Stability Review.
