Azerbaijan, Baku, July 31 / Trend, I.Khalilova /
Banking systems in Russia and the Commonwealth of Independent States (CIS) aren't entirely immune to contagion risk from the eurozone debt crisis, but most are in little danger of a hard hit because their direct links with European Economic and Monetary Union (EMU or eurozone) banks are limited, Standard & Poor's said in its report on Monday.
"The current economic struggles of some members of the eurozone and their banking systems, along with looming tighter capital and liquidity rules for all banks under Basel III, will likely lead some Western European banks to scale back their investments in the form of liquidity or capital abroad," Standard & Poor's Ratings Services believes.
However, according to experts, most Russian and CIS banks don't rely heavily on the eurozone for foreign direct investment (FDI), which shields them from much of this risk.
"We therefore believe the direct contagion risk from the eurozone to banking sectors in Russia (foreign currency BBB/Stable/A-2, local currency BBB+/Stable/A-2) and most of the CIS is moderate. Ukraine (B+/Negative/B) stands out as the country whose banking system is the most vulnerable to falling investments from the eurozone," the report says.
"In our view, the major source of risk for Russian and CIS banking systems is deterioration of global macroeconomic fundamentals rather than direct contagion from difficulties at euro area banks. If the global economic slowdown weighed on oil and commodities prices or on local currencies and local stock markets for a long time, Russian and CIS banking systems could suffer. Specifically, the ruble and the Moscow stock exchange could be particularly vulnerable because they tend to be volatile in periods of crisis. We therefore see the risks to Russia and the CIS banking systems as indirect, as all major economies are to a certain extent interconnected," S&P believes.
The CIS countries this report covers are Azerbaijan (BBB-/Stable/A-3), Belarus (B-/Stable/C), Kazakhstan (BBB+/Stable/A-2), Ukraine, and Uzbekistan (not rated). We also analyzed Georgia (BB-/Stable/B), which withdrew from the CIS after the 2008 war with Russia, along with the CIS countries for purposes of comparison, the report says.