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| Injection of capital? |
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Recapitalisation is arguably the key problem affecting the Russian banking industry, particularly as non-performing loans have increased following the global economic crisis. Currently, Sberbank is the only Russian bank to maintain a top fifty position of world banks by market capitalisation, an unusually low number relative to the size of the Russian economy.
As Russia’s economy moves into a phase of intensive capex requirements, the country’s banking sector will face challenges in balancing its short-term liabilities and the requirements for long-term lending. Currently only five percent of banking sector liabilities have maturity above three years. There is now a critical need to develop mechanisms for long-term funding, including the ability to use sovereign wealth funds and bilateral agency programmes.
SMBC group is a core relationship partner for lending to Russian financial institutions and providing solutions for long-term funding, including ECA/NEXI financing and covered bonds.
Whilst the syndicated loan market remains an important source of funding, the longest tenors are typically limited from three to five years. SMBC group recognises the sector requirements and actively looks for solutions for longer tenors.
SMBC group pioneered untied back-to-back long-term ECA financing for Russian banks. SMBC arranged a 13-year facility with JBIC guarantee for VEB, and a 12-year facility for VTB to finance the Sheremetyevo-3 project. In addition, we are developing a framework for long-term cooperation with Russian financial institutions, the first milestone of which is our cooperation agreement with VEB.
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| International Finance > Russia |
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