Russia: COVID-19 influenced banking CoR 2020-2021

In view of the coronavirus (COVID-19) pandemic expansion worldwide, experts estimated the projected cost of risk (CoR) of the Russian banking sector for the coming 2020-2021 years. The indicator was expected to measure at its highest at six percent, according to the severe setting which implied a critical phase of the crisis would last till the end of 2020, with the negative trend extending through the entire 2021. To compare, this indicator in 2019 was set at 2.3 percent.

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Estimated cost of risk (CoR)* of Russian banking sector for 2020 and 2021 in view of coronavirus (COVID-19), by stress scenario**

Characteristic	Banking cost of risk (CoR)
2019 data	2.3%
Moderate	4%
Negative	5%
Severe	6%

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Release date

March 2020

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Region

Russia

Survey time period

March 2020

Supplementary notes

* Cost of risk is a company's average loan loss provision as a percentage of average portfolio (weighted by average portfolio).

** According to the source, the severe scenario estimates that the critical phase of the crisis to last through the whole 2020, with the negative trend continuing until the end of 2021. Under such setting, the losses of the banking sector can be comparable to that of 2008.

The negative scenario implies that the critical phase of the crisis will end after the first half of 2020, with the negative trend continuing for another year,

The moderate scenario will not lead to losses in the banking sector, but it will still require significant efforts from the players to maintain the quality of the portfolios. According to this scenario, the critical phase of the crisis and the negative manifestations will affect only 2020.

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