Belarus under Threat of Russian Financial Crisis of 2008-2009, Moody's

05.04.2011 09:30
Архив Редакция

April 4, international rating agency Moody's downgraded the long-term ratings of foreign currency deposits of six Belarusian banks from B2 to B3 level. They are Belarusbank, Belagroprombank, Belinvestbank, Belpromstroibank, Moscow-Minsk Bank and Minsk Transit Bank. In addition, the agency experts believe that problems with the devaluation could provoke the events in Belarus, similar to the Russian financial crisis of 2008-2009.

According to the experts agency, the devaluation is credit negative for the asset quality of most banks in Belarus, as around one-third of all loans are extended in foreign currency. «A weaker national currency also introduces liquidity risk for banks, as some deposits are likely to leave the banking system,» the Moody’s experts say.

A similar scenario occurred in Russia in 2008-2009 after the ruble devaluation against the backdrop of economic problems, reportes the agency. As Russian banks stopped lending, the problem loan ratio jumped to 20% from 5% in two quarters. «Such developments are possible in Belarus, where at year-end 2010 the problem loan ratio was a low 2%,» experts say.

Because the devaluation concerns, major Belarusian banks lost 3%-4% of their retail deposits in local currency in March, and this trend will continue if devaluation fears persist, experts say.

According to the International Monetary Fund, a 10% devaluation might not be enough to fix the economic situation. While deposits in foreign currencies remain relatively stable, the situation may change if the population sees additional risks in banks. Returning to the Russian case, many banks in that country lost 10% of deposits in late 2008.
 
A major difference with Russia is that there was a flight to quality from private banks towards state banks; in Belarus, however, most deposits are already at state banks, implying a somewhat greater stability in deposits compared to Russia.

In addition, Moody’s also downgraded the rating of deposits in national currency of three state banks — Belarusbank, Belagroprombank, Belinvestbank — from B1 to B2 level, as well as of the private Moscow-Minsk Bank from B1 to Ba3 level. However, the agency affirmed the local currency ratings of Belpromstroibank at Ba3 level and MTB at B2 level.
 
The financial crisis of 2008-2010 in Russia as part of the global financial crisis became possible, according to Russian presidential assistant Arkady Dvorkovich, due to the integration of the Russian economy in the world economy, when «any event abroad affects the value of the Russian bonds and stocks, liquidity, incomes and economic growth.»

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