Russia economy meltdown as Moscow on brink of 'systemic banking crisis'

Russia's economy is under threat from a potential banking crisis, companies withholding dividend payouts and a significant downturn in growth. The Kremlin-linked Centre for Macroeconomic Analysis and Short-Term Forecasting (CMASF) raised concerns about issues in the banking sector, including an increased .

In a report this week, the CMASF highlighted an increased risk of "a systemic banking crisis" in Russia. Such a crisis would involve at least one of three things; a run of the banks by depositors, non-performing loans exceeding 10% of total banking assets, or large-scale bank recapitalisations . So far, none of these conditions have been met, but the risks are escalating, it said.

The CMASF told that a sharp increase in the volatility of the main index of the Russian stock market (MOEX) is a good indicator of the heightened economic uncertainty people are feeling.

This week, Russia's stock market experienced a sharp drop following threats by Donald Trump of new sanctions and his taunt after Moscow's drone and missile barrage of Ukraine that Putin was "crazy".

The squeeze on the Russian banking system is intensifying, with the ratio of money supply to the monetary base accentuating liquidity pressures. This could heighten vulnerabilities and the risk of "cash gaps" .

Despite facing severe western sanctions intended to penalise Putin's aggression and starve his military endeavours, Russia's economy has displayed surprising resilience.

Yet, Putin's extensive defence expenditure that bolstered growth is now tainted by inflation and labour shortages, not least due to draft dodgers and wartime casualties in Ukraine - signalling deeper-seated economic troubles ahead.

Back in April, concerns over an impending surfaced.

This came after the central Bank of Russia's decision to hike its key interest rate to a staggering 21% in a bid to rein in soaring inflation, currently pegged at 10.2%, amidst fears that the move will quash lending and investment.