1. N A T I O N A L R E S E A R C H U N I V E R S I T Y
National group paper prepared by:
Alexander Kulakov and
Vitaly Pentegov

2. Meet our group
2
Management Department Mathematical Department
Sberbank CIB VTB bank
Alexander
Kulakov
Vitaly
Pentegov
N A T I O N A L R E S E A R C H U N I V E R S I T Y

3. Contents
3 N A T I O N A L R E S E A R C H U N I V E R S I T Y
Banking sector in Russia
The Great Recession
Russian crisis in 2014-2015
Anti-crisis government program

5. Structure of the Russian banking sector
5 N A T I O N A L R E S E A R C H U N I V E R S I T Y
Central
Bank
Banks
Credit
organizations
Subsidiaries
of foreign banks
Commercial banks
Banks with state share
Banks with foreign share
Creditorganizations
Sberbank
VTB
Gazprombank
Open bank
Alfa bank
Rosselkhozbank
Top 6 banks by assets

6. Main indicators of Russian banking system
6 N A T I O N A L R E S E A R C H U N I V E R S I T Y
0
2
4
6
8
10
12
14
0.0
1000.0
2000.0
3000.0
4000.0
5000.0
6000.0
7000.0
8000.0
9000.0
10000.0
2010 2011 2012 2013 2014 2015
Кредиты, депозиты и другие средства от Банка
России
Депозиты Минфина и другие гос. средства
Фондирование ЦБ, % от пассивов
Deposits from Ministry of Finance and another state
funding
Funding from the central bank, % of capital
Credits, deposits and other funding from the central bank
1094 1071 1049 1047 1046
956 923
834 830 827
01.01.2013 01.01.2014 01.01.2015 01.02.2015 01.03.2015
Registered credit institutions Officially functioning
Qualitative characteristics of Russian banking sector Share of the government support, bln. of rubles
0
50
100
150
01.01.2013 01.01.2014 01.01.2015 01.02.2015 01.03.2015
Ratio of high liquid assets to total assets
Ratio of liquid assets to total assets
Ratio of high liquid assets to demand liabilities (N2)
Ratio of liquid assets to short-term liabilities (N3)
Ratio of clients' funds to total loans
Liquidity, %

7. Main indicators of Russian banking system
7 N A T I O N A L R E S E A R C H U N I V E R S I T Y
Some indicators of the banking sector financial soundness, %
13.7 13.5 12.8 12.6 12.2
8.5 9.1 9.2 9.4 9
50.7 51.4 52.1 52.7 52.1
1.01.13 1.01.14 1.07.14 1.10.14 1.11.14
Ratio of own funds (capital) to risk-weighted assets (Basel
III N1.0 ratio)
Tier I capital ratio N1.2 (Basel III)
Risk-weighted assets (Basel III) to total assets ratio
2007 2008 2009 2010 2011 2012 2013 2014
Deposits from organizations
Deposits of individuals
Loans to individuals
Credits for non-financial organizations
Equity
Assets
Banking sector growth indicators per year

9. About the crisis
9 N A T I O N A L R E S E A R C H U N I V E R S I T Y
The Great Recession in Russia – the Russian financial end economic crisis
started approximately in July, 2008 and officially ended in April, 2010
caused by the global financial crisis and was compounded by political fears
after the war with Georgia and by the plummeting price of Urals heavy
crude oil, which lost more than 70% of its value since its record peak of
$147 on 4 July 2008 before rebounding moderately in 2009.
World Bank: Russian crisis in 2008 started as the
crisis of private sector caused by high level of foreign
funding in conditions of triple shock: from external trade,
capital outflow and high restrictions on foreign borrowing.

10. Causes of the crisis
10 N A T I O N A L R E S E A R C H U N I V E R S I T Y
The impact of the global crisis was stronger to Russia than to another countries
due to the following 3 reasons:
 American financial catastrophe;
 Oil price decline due to high dependence of Russia on its export;
 Errors and misunderstandings of Russian government
Alexey Bayer, chief observer in Research Journal

11. Stock market decline
11
2008
 Vladimir Putin criticizes Mechel’s
management
 Increase in anti-monopoly deals
Newsweek Journal: After the war starts, Russian stock
market faced one of the highest declines in stock quotes
for the last 10 years. During one day quotes fell by 6%.
Investors afraid of beginning of a new era of
confrontation between Russia and West
2008
24 July
20 September
11 N A T I O N A L R E S E A R C H U N I V E R S I
Illarionov A.N., economist, past president Putin advisor:
This happened because of the aggressiveness of Russian authorities against the
Russian and foreign business. One of the most brightest events were: the sending
of the doctor to Mechel’s CEO and resignation of Robert Dudley from TNK-BP
War in South Ossetia
The beginning period: stock market decline

12. 12
Decline in oil prices 2008
On the 16th of 2008 Urals Oil slumped to less
than 70 dollars for barrel. This price was the
basis indicator for Russian budget for 2009.
Credit crisis of
the Russian companies
In the beginning of October the level of
companies’ external debt was 527 billion
dollars – the level of foreign-exchange
reserve that year
2008
4 July
October
12
Employment problems 2008
In October 2008 the level of firing in companies
started to increase despite of promises of
officials and expectations of analysts
8 October
Illarionov A.N. (9 October): “There is a 15% decline
in stock indices in the USA for the last months but
in Russia for more than 30…”
Source: ROSSTAT, Russian Central Bank,
Reuters
In the last 5 month the Russian stock market lost
more than 70% of the level in May. The market
capitalization of Russian companies fell by more
than 900 billion dollars
“Great recession in Russia”

13. 13
Decrease in ratings by
world rating agencies
2008
After the decrease in ratings for several Russian
banks from Fitch and Moody’s, S&P also
decreased its rating on 13th Russian companies
and then the sovereign rating from “stable” to
“negative"
Beginning of the crisis
in real sector2008
10 October
18 November
13
GDP decrease 2008
0.4% of GDP decrease from the last month
indicator
25 November
Russian president Dmitry Medvedev told
about the income of crisis to the real sector
(industrial).
According to the statements published
by the Russian central bank on the 26th
of November the total loss of the
Russian banking sector came to 39.3
billion of rubles in October 2008. 1/3 of
Russian banks (288 banks) lost 69
billion of rubles excluding
Vneshekonombank’s loss of 46 billion
“Great recession in Russia”

14. RTS index, S&P 500 and Oil price comparison
14 N A T I O N A L R E S E A R C H U N I V E R S I T Y
A – Vladimir Putin criticizes Mechel;
B – war in South Ossetia 2008;
C – Recognition of Abkhazia and South Ossetia by
Russia;
D – Alexei Kudrin "no systematic crisis" speech;
E – measures to save major banks are adopted by the
Russian government;
F – Global financial crisis of September–October 2008;
G – President Dmitri Medvedev announced additional bailout
financing
$147(July 4, 2008)
$45
(January 1, 2008)

15. 15
15 N A T I O N A L R E S E A R C H U N I V E R S I
Decrease in turnover 2009
Decrease in production2009
10 October
18 November
End of recession 2009
24 August
The turnover of commodities decreased by
2.4% firstly since 1999
According to Forbes, the number of Russian
dollar billionaires decreased from 110 to 32 from
May, 2008 to February, 2009. Their wealth
decreased almost by 5 times.
In the 1Q of 2009 the production of goods
decreased by 14.3% in comparison with the
1Q of 2008
In the beginning of August 2009, Russian GDP
increased by 7.5% on the basis of the 2Q of 2009. In
the 2Q of 2009 the GDP was -10.9%
Source: ROSSTAT, Russian Central Bank,
Ministry of Economics
19th of February 2009 – the peak of the crisis

16. 16
End of the crisis
2010
20 April
16 N A T I O N A L R E S E A R C H U N I V E R S I
End of the crisis
Change in USD/Ruble and RTS
index on the peak of the crisis
relative to the same indicators
of the year before and of the
next year after the peak,%

17. 17
17 N A T I O N A L R E S E A R C H U N I V E R S I
Summary
6.50
9.50
6.00
5.00
2007 2008 2009 2010
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
2007 2008 2009 2010
GDP
Interest Rate
Banking sector dynamics
2290.51
631.89
1444.60
1770.28
2007 2008 2009 2010
RTS index
Credit portfolio, % Revenue
Deposits from physical clients, %

18. 18 N A T I O N A L R E S E A R C H U N I V E R S I
Government anti-crisis solutions
In 2008, the anti-crisis program’s cost 1089 bln. ₽ (20 bln. €; 2.6% of GDP). The
support of financial sector cost 785 bln. ₽ (14 bln. €), The support of industry
sector — 304 bln. ₽ (6 bln. €).
Measures for financial sector support implemented during the crisis in 2008:
 Subordinated debt — 450 bln. ₽ (8 bln. €);
 Recapitalization and another direct support — 335 bln. ₽ (6 bln. €);
 Recapitalization of the Deposit Insurance Agency — 200 bln. ₽ (4 bln. €);
 Banks recapitalization — 75 bln. ₽ (1.4 bln. €);
 Recapitalization of the Mortgage Agency — 60 bln. ₽ (1 bln. €).
Measures for industrial sector support implemented during the crisis in 2008 :
 Tax and budget improvement measures for manufacturers — 272 bln. ₽ (5 bln. €);
 Support of industries — 52 bln. ₽ (1 bln. €);
 Tax and budget improvement measures for manufacturers for people — 32 bln. ₽
(0.6 bln. €);
 Purchase of commodities for military men and socially vulnerable groups —
32 bln. ₽ (0.6 bln. €).

19. 19 N A T I O N A L R E S E A R C H U N I V E R S I
Government anti-crisis solutions
In 2009, the anti-crisis program’s cost 1834,77 bln. ₽ (33 bln. €), The support of
financial sector cost 625 bln. ₽ (11 bln. €), the support of industry sector —
798,3 bln. ₽ (14.5 bln. €), the support of regions — 300 bln. ₽ (5.5 bln. €), the
support of socially vulnerable groups — 111,5 bln. ₽ (2 bln. €).
In total, government spent 5.4% of GDP for the support of banking sector. This
cost equals approximately the half of the total capital of the Russian banking
system. Bank VTB received ¼ of this sum.
796 bln.€
319 bln.€
1 114
bln.€

21. | 21
There were several reasons of Economic crisis in Russia started 2014
Economic slowdown since
2013
Reduce in world oil prices
Devaluation of Russian ruble
Economic sanctions imposed
on Russia
| 2121 N A T I O N A L R E S E A R C H U N I V E R S I T Y

22. The main reason for the crisis was the reduction in oil prices and Ruble’s
devaluation followed by
22 N A T I O N A L R E S E A R C H U N I V E R S I T Y

23. Problems with economy again
Timeline of the crisis
2013
Stagnation continues due to reduce
in oil prices and economic sanctions2014
December
January - August
In the end of 2013, Russian President
Vladimir Putin admitted that stagnation of
Economy is observed. IMF and Word Bank
also stated the decline in economic growth
indicators
From January to August 2014 Russian
currency has weakened by 24,9%.
In March the economy was first hit by
economic sanctions imposed on Russia
because of the annexation of Crimea
In August Russia imposed trading embargo
on European countries
23 N A T I O N A L R E S E A R C H U N I V E R S I

24. Black Monday – Russian Ruble
Dramatic fall 2014
On December 12th Rosneft issued an $11 billion
rouble-denominated bond at a lower yield than
government bonds were offering that day, which
the central bank immediately said it would accept
as loan collateral.
On 15th December Russian Ruble has lost 10% of
its value. This was followed by Black Tuesday,
when Ruble has lost almost 13% of value. The
panic on Russian markets has started.
Downgrade in ratings
On 16th January Moody’s decided to change Russia’s
credit rating from Baa2 to Baa3, on 21st February it
was changed to Ba1. On 19th January Moody’s has
downgraded ratings of such companies as
«Sberbank», VTB to «Baa3».
On 26th January Standard & Poor’s has downgraded
Russia’s credit rating to BB+
2015
15 December
16 January
Timetable of the crisis
24 N A T I O N A L R E S E A R C H U N I V E R S I

25. Partial recovery 2015
8 April
Drop in Russia’s reserve fund
is stated
On 1st March Russia’s reverses have fallen to
$360 billion, which is the lowest measure since
2007.
That day Russian minister of economy, Aleksei
Ulukaev stated that 2015’ budget will be
completed with more than 2 trillion Rubles ($40
billion) deficit
2015
1 March
Russian Ruble has strengthen for more
than 10%, although it is stated that it is
overvalued.
The CPI for March is 16.9%
To be continued…
Timetable of the crisis
25 N A T I O N A L R E S E A R C H U N I V E R S I

26. Crisis did much harm for Russia’s economy, enterprises and citizens
This lead to downgrade in ratings
Rating Prev. grade Current grade
Fitch
Moody’s
S&P
4.80% 5.70%
2014 2015
Unemployment in Russia slightly increase, but further increase is
expected
7% 9%
10%
74%
 7% of workers are in danger of
losing their jobs;
 9% have experienced the decrease in
salary;
 10% don’t get the salaries in time
Banking sector was also affected by negative trends, bln. euros
BBB-
Ba1
BB+
BBB
Baa1
BBB
26 N A T I O N A L R E S E A R C H U N I V E R S I T Y
4.7
6.74
9.24
7.43
3.73
10.42
15.42
18.38 18.05
10.7
42.7
12.9
39.4
-2.5
-10
0
10
20
30
40
50
60
0
5
10
15
20
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Banks' Profits, billions of Rubles Credit portfolio growth, % Deposits growth, %

28. | 28
This actions made by the government should help country to get out
of the crisis
5.38
35.89
Social
Liabilities,
bilions of Euro
Economic
growth
activation,
billions of Euro
0.29
0.95
0.18
0.553.42
Amount of social liabilities
Drug supply for citizens
Unemployment
programmes
Programmes for
disabled people
Social payments for
unemployed people
Rise of pensions
Economic growth activation
0.180.07
28.18
3.64
2.91
0.55
0.36
Small business support
Raw material sector
support
Banking sector support
Investing projets support
Regions direct support
Project financing
Indusrtial sector support
3.5
2.28
1.24
1.19
1.14
0.98
0.88
0.54
0.38
0.26
0.24
VTB
Gazprombank
Rosselhozbank
VTB 24
Alpha-Bank
Otkrytie
Moscow Bank
Promsvyazbank
MCB
Saint-Petersburg
Rossija
28 N A T I O N A L R E S E A R C H U N I V E R S I T Y

29. Summary: anti-crisis policy in Russia could be characterized as:
Huge role of government in economic processes during
the crisis
High costs of anti-crisis programs
Inadequate policy of the government and Central Bank
Support of large government companies
| 2929 N A T I O N A L R E S E A R C H U N I V E R S I T Y

30. N A T I O N A L R E S E A R C H U N I V E R S I T Y
pentegovvit@gmail.com
alexander.d.kulakov@gmail.com

31. Postscript
31 N A T I O N A L R E S E A R C H U N I V E R S I T Y
Why should a financial engineer be paid four times to a hundred times more
than a real engineer? A real engineer builds bridges; a financial engineer builds
dreams. And you know, when those dreams turn out to be nightmares, other
people pay for it
Andrew Sheng
Chief Adviser to the China Banking Regulatory Commission