One in five Russian banks at risk of collapse

The Center for Macroeconomic Analysis and Short-term Forecasting estimates that as many as 200 Russian banks face collapse this year as a combination of bad loans and falls in the value of the rouble punish small and mid-sized firms, reports Russian business daily, Vedomosti.

Russia's banking sector holds US$192 billion of external debt, around 70 per cent of which is dollar denominated. The total is growing ever-larger as the rouble continues to fall almost 50 per cent against major currencies.

The International Monetary Fund expects the Russian economy to contract by around 3.5 per cent this year,  due to the combined effects of the collapse in crude oil prices and international sanctions against Russia for its part in the Ukraine crisis.

Businesses will struggle to stay solvent - a risk brought into sharp focus by Business Insider, which reports that "the government has already been forced to inject $2.4 billion into financial institutions last month, including state owned lenders VTB and Gazprombank."

"We have reached a situation in which these firms are being forced to shrink their balance sheets, which can start a domino effect: the efficiency of small banks has been falling for a long time, their existence has become hopeless, and now there's crisis," said Alex Buzdalin, deputy director of the Interfax Center for Economic Analysis.