Russian banks are expected to face a major crisis due to the war
The Russian banking system could face a serious financial crisis due to the burden of financing the war economy. This conclusion is contained in an intelligence report from a European country prepared for EU officials.
The document notes that Russian banks are taking on increasingly greater risks associated with supporting military spending. According to the report’s authors, this could lead to widespread problems in the country’s financial sector amid preparations for a new package of European sanctions.
According to the document titled “Memo on the Likelihood of a Banking Crisis in Russia in 2026,” government programs offering preferential loans to the defense sector and for mortgages, as well as debt restructuring, create the illusion of a dynamic economy, but in reality mask deep vulnerabilities. An economic shock, such as large-scale sanctions against banks, could trigger a crisis.
Bad loans and a wave of bankruptcies
Analysts note that lending to defense enterprises and regional projects has increased the share of loans that may never be repaid. According to the report’s estimates, the share of non-performing corporate loans reached 10%, and at some major banks, the level of non-performing retail loans stood at 15% in 2025.
The situation is exacerbated by the following factors:
Debt trap: Government programs have prompted more than 13 million Russians to take out at least three loans simultaneously.
Mass bankruptcies: In 2025, more than 500,000 Russians declared bankruptcy, nearly a third more than the previous year.
Capital flight: The amount of cash outside the banking system grew by more than 17% year-over-year—to over 19 trillion rubles ($243 billion)—which is putting increased pressure on banks that rely on deposits.
At the same time, the Central Bank of the Russian Federation denies that the situation is critical, asserting that banks’ capital buffers are at their highest level in three years and that the share of non-performing corporate loans is only 4%. In addition, the Russian Ministry of Economy has already downgraded its GDP growth forecast for 2026 from 1.3% to 0.4%.
EU Prepares Strike Against Financial Sector
The European Union is currently finalizing its 21st sanctions package, which is scheduled to be completed in July. The restrictions will target the banking system and cryptocurrency networks, as well as drone manufacturers and oil traders. Plans call for adding nearly 90 banks to the blacklist, after which the total number of sanctioned financial institutions will exceed 100—more than half of Russia’s banks with international ties.
Although major players such as Sberbank claim that customers are getting used to the sanctions, signs of strain are mounting. VTB, Russia’s second-largest bank, has already announced plans to increase reserves to protect against potential loan losses and high fuel prices.
This was reported with reference to data from Reuters.
European intelligence has warned of the risk of a banking crisis in Russia — Reuters.
Russia has begun freezing bankdeposits held by citizens of unfriendly countries.
