VTB’s Kostin Says ‘New Risks’ Building for Russian Banks

Russia’s financial industry is facing “new risks” as banks loosen lending standards amid “high” liquidity, said Andrei Kostin, chief executive officer of VTB Group, the country’s second-biggest bank.

“There’s a danger of growing new risks in the system,” Kostin said at a conference in Moscow today. “The market is rather sluggish, competition is strong, liquidity is high.”

Banks are increasingly lending to related parties and raising the size of credit lines to companies, while becoming less vigilant in gauging borrower quality, which poses a “threat of later accumulation of risks,” according to Kostin.

Lending is set to increase 20 percent this year, central bank Chairman Sergey Ignatiev said today, adding that loan portfolios gained about 1 percent last month. The regulator has sought to support lending and economic growth by keeping its refinancing rate within a quarter-point of record lows.

Retail lending rose 14.3 percent last year after shrinking 11 percent in 2009, central bank data show. That outpaced the 12.1 percent increase in corporate lending after a 0.3 percent gain in 2009.

To contact the reporters on this story: Artyom Danielyan in Moscow at adanielyan@bloomberg.net; Scott Rose in Moscow at rrose10@bloomberg.net.

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net.

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