Russia’s banking system entered a phase of systemic crisis in 2025
In 2025, Russia’s banking system lost key signs of resilience, despite reassuring statements from the regulator, according to the Ukrainian Foreign Intelligence Service. Net profit in the sector fell by 8% compared to the previous year, to $45 billion, while return on equity dropped to 18%.
The deterioration in performance is attributed to a rapid increase in loan loss provisions and rising costs of funding due to tight monetary policy, indicating the onset of deep systemic dysfunction.
Currently, the share of non-performing loans in Russia has risen to 11%, and the default rate on unsecured loans has reached 12%. Even analysts at the Kremlin-linked Centre for Macroeconomic Analysis and Short-Term Forecasting have effectively acknowledged signs of a systemic banking crisis. According to them, the current “stability” is maintained only through the dominance of state-owned banks, mass restructuring of troubled assets, and regulatory relaxations.
The Central Bank of Russia has effectively switched to a hands-on risk management mode, which allows it to conceal the real scale of losses. This approach merely postpones the crisis while increasing the risk of a sudden deposit outflow in the future. Ultimately, the banking sector will require additional state support, heightening fiscal risks for Russia and making the crisis a long-term factor.
After three years of unexpected economic growth, Russia is now facing a sudden slowdown — war expenditures, inflation, and falling oil prices are putting pressure on an economy that until recently appeared resilient to sanctions.
British intelligence notes that Russia’s demographic crisis is deepening due to the full-scale war against Ukraine, mass emigration, and heavy combat losses. Kremlin efforts to boost birth rates are unlikely to halt population decline in the near term.
