More Russian banking problems

Investment Analysis Clubs Macro Economic Trends and Risks
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I’ve been on ‘Russia watch’ for a few weeks. It just looks worse and worse

Russia’s primary state development bank, VEB.RF, is preparing to cut its workforce by 15% as the country’s economy faces mounting pressure.

The bank, which manages the pension savings of 38 million citizens and serves as a major financial arm for government national projects, aims to reorganize its operations to meet fiscal targets for 2027, according to The Moscow Times on June 2.

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Ukraine Economic Situation
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If I had money saved in this bank I’d pull it out right away and transfer it to a different bank. I wonder how Russia handles insurance on accounts, bank runs and shutting down insolvent banks?

Wendy

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I’m not too sure that this would help. Banks are like dominoes, one falls and they all fall.

Russia is a real puzzle to me. As Churchill said:

Russia is a riddle wrapped in a mystery inside an enigma.

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…and Russia had its WWI disastrous collapse and Leninist/Stalinist dictatorship, aborting its promising late 19th century beginnings of modernization. The governance and finance culture is deeply corrupt and bizarre, the banking system very much included. God help them.

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More recently, in 1998, Russia had a debt crisis. The 1998 Russian financial crisis was a severe economic collapse characterized by a sovereign debt default, the devaluation of the ruble, and a banking system freeze. [1, 2]

Russia is currently experiencing severe economic stress that mirrors several dynamics of the 1998 crisis, though the fundamental drivers differ. While 1998 was caused by open global market integration, today’s pressure stems from wartime isolation, a structural fuel crisis, and a highly fragile banking system.

The Imminent Risks: Similarities to 1998

  • A Brewing Banking Crisis: Intelligence reports and local think tanks warn that Russia faces a major banking crisis. Much like 1998, banks are structurally vulnerable, heavily weighed down by artificial state-backed loans and refinanced high-interest debt that may never be repaid. [1, 2]
  • Bond Market & Debt Strains: In July 2026, the Kremlin was forced to suspend its regular weekly government bond auctions indefinitely after a series of failed sales and a near-total lack of investor demand. This echoes the unsustainable debt spiral of the 1998 GKO bonds. [1, 2]
  • Surging Deficits & Budget Stress: Driven by spiraling war costs, the federal budget deficit ballooned to 6 trillion rubles ($83 billion), blowing past original projections. Simultaneously, over 20 regional federal subjects are classified as financially troubled, forcing the government to quietly write off billions in local debts. [, 2, 3]
  • Liquidity Freezes & Payment Delays: Signs of systemic non-payment have re-emerged. Commercial bill non-payments have escalated, and the average timeframe for paying business suppliers has doubled from 54 to 108 days, mimicking the pre-default gridlock of the late 1990s. [1, 2]

:stop_sign: Key Differences from 1998

  • The Catalyst: The 1998 crash was triggered by falling oil prices and global investor panic. The current 2026 strain is driven by international sanctions and widespread Ukrainian drone strikes, which have decimated Russia’s oil refineries and cut energy export revenues.
  • The Fuel Crisis: Russia is dealing with a severe internal fuel shortage. Over 75% of Russian regions have implemented fuel restrictions or alternating license plate systems to buy gasoline, a complete inversion of Russia’s historical role as a seamless energy exporter.
  • Controlled Interest Rates: In 1998, the Central Bank aggressively tripled rates to 150%. Today, the Russian Central Bank operates under tight wartime capital controls, adjusting its key rate around the 14%–16% range to manage persistent double-digit inflation. [, 2, 3, 4, 5, 6]

:bar_chart: Quick Comparison: 1998 vs. Today

Economic Indicator 1998 Crisis 2026 Situation
Primary Cause Falling global oil prices & Asian Financial Crisis. Sanctions, war overspending, & refinery drone strikes.
Sovereign Debt Massive default on domestic ruble bonds (GKOs). Bond auctions halted due to a lack of buyers.
Energy Sector Free-flowing exports, but at low global prices. Severe internal fuel crisis; Euro standards lowered.
Banking System Immediate, systemic collapse and frozen deposits. Under high risk of a collapse masked by state subsidies.

Unlike 1998, a Russian financial crisis today wouldn’t impact the U.S. Following years of escalating sanctions, Western nations have cut off over three-quarters of the Russian banking sector from international markets. Foreign investors and major institutions have already unwound their Russian exposures, meaning there are no large-scale Western assets left to be wiped out.

Wendy

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Yes, and when things go wrong in Russia they go wrong very quickly and usually in a big way.

Possibly the only thing worse than Putin winning the war in Ukraine is Putin losing the war in Ukraine.

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Not true. Aside from the high profile failures such as Silicon Valley Bank, there are some 25 bank failures in the US each year.

Other pressure on the Russian economy – Wildberries is the Russian equivalent of Amazon. Ukrainian drones have destroyed several of their million-square-foot warehouses.

Russian e-commerce giant Wildberries, Moscow’s answer to Amazon, said on Friday three more of its warehouses had been attacked by Ukraine overnight, part of a widening campaign by Kyiv to damage Russia’s economy and logistics chains…

Wildberries, whose banking arm had sanctions imposed on it by the European Union this week over its financial contribution to the Russian budget, plays a central role in Russia’s consumer economy. Its targeting by Ukraine appears to be part of Kyiv’s attempts to ensure ordinary Russians feel the impact of the war which has raged on Ukrainian territory for more than four years.

The strikes, the fourth on Wildberries’ facilities since last weekend, threaten serious losses for businesses that sell through Wildberries and potential disruption to customers who use it to buy clothing, appliances, medicines, cosmetics and a host of other products.

DB2

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I am guessing that Putin’s ruling clique of various gangsters controlling various assets is now quietly collapsing, each separately seeking out how to survive/escape long suppressed vendettas/hide loot abroad, and with Putin primarily focused on trying to maintain control over the FSB and its internal military forces while keeping the official army from mutinying and returning home. I expect China will offer lots of help to Putin or his replacement to finance a new order at the price of ceding ancient West China, now East Siberia, and long term contracts of various resources.

Putin’s legitimacy and power is vanishing in the smoke of the warehouses and gas stations of the fragile consumerist society now burning from Ukraine drones, and the long careful exploitation of the non-Russian populations as cannon fodder will end in rage and rebellion.

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