According to the rating agency Moody ‘s the depreciation of the ruble exchange rate due to the Ukrainian crisis, is the reason for the decision of Russia`s Central Bank earlier this week to raise the key interest rate temporarily from 5.5 % to 7 %. This decision has as expected stabilized the ruble rate and will reduce inflationary pressures. But at the same time, interest rates for business is driven upwards and refinancing risks increase, according to a statement by the US based agency . Credit risks for Russian banks in Ukraine are around 30 billion USD.
The increase of the key interest rate will have a negative impact on Russia’s economic growth, which already before the project was slowed, according to Moody’s .The agency expects for 2014 a GDP growth in Russia of 2 percent, against 3.5 percent in 2013..
Moody’s also assumes that Russian banks have a need of recapitalization n their Ukrainian subsidiaries. The current increase of the key rate and subsequent increase in credit costs will affect the capitalization of Russian banks negatively.
Problem credits of Russian banks in Ukraine, however, have no significant impact on Russia’s banking system, according to Moody’s analysis.