Moody's Pointed to Risks for Belarusian Banks Due to Withdrawal of Deposits

The agency has put the long-term ratings of four Belarusian banks under review.

The revision is taking place in connection with the possibility of lowering them, according to the agency's review received by RBK. We are talking about ASB Belarusbank, Belinvestbank (both owned by the state), Belgazprombank (owned by Gazprom and Gazprombank), and BPS-Sberbank (owned by Sberbank).

"The rating actions are explained by risks to liquidity and the quality of banks' assets, which are associated with political instability and social tensions after the presidential elections," the review said.

Among the main risks for these banks' liquidity and funding, Moody's names the withdrawal of deposits by the population. "Increased social unrest could significantly undermine depositors' confidence in banks and cause a surge in withdrawals," analysts said. At the same time, household deposits are an important source of funding for Belarusian banks; they account for 36% of the system's total liabilities.

The agency does not name the exact volume of the outflow of deposits, but refers to data from banks, according to which the outflow was moderate and did not exceed 10% of the total volume of deposits of individuals. In addition, the funding losses were partially offset by the inflow of funds from corporate clients.

The greatest risk to the liquidity of rated banks is associated with the likelihood of "significant withdrawal of deposits in foreign currency", according to the agency. As of July 1, 2020, 58% of deposits in Belarusian banks were in foreign currency. In three of the banks rated by Moody's, liquid assets in foreign currency covered only 52-67% of short-term liabilities in foreign currency. "At the same time, these liquid assets were, for the most part, government or quasi-government bonds, which now lack liquidity, since they are most often traded on the local market and fell in price amid political uncertainty," the review notes.