Bank solvency and lending – not so gloomy

Overview

Russia’s economy has spent the summer bumping along a deep bottom despite two consecutive quarters of stronger oil prices. This highlights the absence – so far – of other preconditions for a return to growth. One such precondition is a revival of domestic credit expansion.

The conventional wisdom is that this depends on banks purging bad loans and replenishing their capital. We see things differently. Sufficient conditions for renewed loan growth are now in place even before...