Russian banks are facing mounting pressure from war costs, sanctions and risky lending, with a European intelligence assessment warning the financial system could be heading toward an “explosive” crisis, according to a Reuters report.
The assessment, prepared for senior European officials and reviewed by Reuters, argues that Russian banks have increasingly been used to prop up the wartime economy while hiding deeper vulnerabilities. Years of heavy lending to defense companies, state-backed projects and households have left the system exposed to a sharp shock if conditions worsen or Western sanctions tighten further.
Russia’s Economy Ministry has cut its 2026 GDP growth forecast to 1.3% from 2.8%, and now expects growth of 1.4% in 2027, down from 2.1%. European officials estimate that 10% of corporate loans are doubtful, while non-performing mortgage ratios could climb as high as 15% this year. The assessment also notes that more than 500,000 Russians declared bankruptcy in 2025, up 18% from the previous year, as many households took on multiple loans through state-backed programs.
At the same time, the European Union is discussing a new sanctions package targeting banks and cryptocurrency networks tied to Russia’s sanctions-evasion efforts. The proposal would add nearly 90 banks to the blacklist, bringing the total number of sanctioned lenders to more than 100 — more than half of Russia’s internationally connected banks. The measures would also target oil traders, refiners and dozens of additional individuals and entities.
The strain is already showing inside Russia’s financial system. Cash held outside banks has jumped more than 17% over the past year to more than 19 trillion rubles, or roughly $243 billion, putting added pressure on lenders that depend on deposits to fund loans. VTB, Russia’s second-largest bank, has already said it plans to boost reserves to protect against possible loan losses and high fuel prices.
Russian officials have publicly downplayed the danger. Central Bank Deputy Governor Filipp Gabunia recently said financial-sector vulnerabilities are “not critical,” while Sberbank CFO Taras Skvortsov argued that Russian banks have adapted to sanctions and that many clients “do not even know about sanctions.” Even so, the European assessment paints a picture of an economy increasingly dependent on state spending, defense lending and financial support that may be masking deeper instability.
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