An improvised memorial for fallen fighters of Wagner private military company in central Moscow, which has become a general memorial for the Russian military toll – Alexander Nemenov/AFP via Getty Images
Half a million Russians went bankrupt last year as Vladimir Putin risks an “explosive” banking crisis, an intelligence report has warned.
Deteriorating business loans and growing household debt mean Russia is moving closer to a potential financial meltdown, according to a document prepared for European officials before a new round of sanctions.
The report, titled “Note on the probability of a banking crisis in Russia in 2026” and seen by Reuters, found the number of households declaring bankruptcy surged by nearly a third last year to hit 500,000. The document was prepared by an unnamed European country.
Russia’s banks are under increasing strain because the Kremlin pushed them to forego normal credit checks and issue subsidised loans to defence companies and homebuyers to boost the economy and fund the war.
This means they are now lumbered with bad debts just as the economy crumbles. Their vulnerabilities have so far been masked by state-backed credit programmes, loan restructuring and government support, which would be unsustainable in the longer term.
The two-page document warned: “The situation creates the illusion of a dynamic economy that, in reality, conceals an explosive situation which an economic shock, such as an ambitious package of sanctions against banks … could trigger.”
In May, the Russian economic ministry cut its official forecast for GDP growth this year from 1.3pc to 0.4pc and from 2.8pc to 1.4pc in 2027.
Many analysts think the situation is far worse than official data suggest and the country may already be in recession.
The report estimated that the share of corporate loans that may never be repaid has surged to 10pc and said some major banks have warned that as many as 15pc of their consumer loans are non-performing.
More than 13 million Russians took out at least three simultaneous loans last year on encouragement from state programmes.
EU officials are hoping to finalise a 21st package of sanctions this month, targeting Russia’s financial system.
Diplomats are discussing targeting another 90 banks, bringing the total number of blacklisted Russian lenders to 100, in their next sanctions package. This would mean hitting more than half of Russia’s internationally connected banks.
They are also planning to target cryptocurrency networks, oil refiners and traders, and drone producers.
The intelligence report came after Russia’s Centre for Macroeconomic Analysis and Short-term Forecasting (CMASF), which is aligned with the Kremlin, published a report in February warning that a “banking crisis has now been confirmed”.