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Sanctions are pushing Russia's already-fragile banks to the brink

Even before the barrage of western sanctions imposed in response to the invasion of Ukraine, Russia's banks stood out for their bad loans and low capital ratios. They’re now vulnerable to a dangerous foreign currency asset-liability mismatch that sanctioned FX reserves won’t be able to backstop, says Emerging Europe Economist Liam Peach. And the slump in the ruble and the sizeable hit to Russia’s economy from sanctions will only exacerbate these strains. The upshot is that the state will have to step in with significant support measures, including recapitalisations. “The one crumb of comfort here is that Russia’s fiscal position gives it space to do so,” Peach says. Related link: Russia's banks on the brink

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