Russia's banking crisis deepens as bad loans and industrial decline worsen
Russia's Military Spending Spirals Out of the Kremlin's Control
One of the most alarming signs has been the plight of Promsvyazbank, a key lender to the defense industry. While it had previously profited handsomely from financing military contracts, in 2025 it reported a loss of 19.2 billion rubles after setting aside 300 billion rubles in provisions for bad loans, The Telegraph reports (via Charter97.org).
Analysts argue that this is not an isolated failure but a systemic crisis. According to Russian sources, the share of potentially troubled corporate loans has already exceeded 11%, with the total volume of high-risk lending reaching trillions of rubles. The situation is even worse among households, where the share of non-performing loans surpasses 13%.
"We are already formally in a banking crisisâall that's missing is a bank run," said Vladimir Milov, a former Russian deputy energy minister.
Since the start of the war, the Kremlin has propped up the economy through massive lending, particularly to the defense sector. This created an illusion of stability while quietly accumulating hidden debt risks. Experts estimate that total loans to defense enterprises have exceeded $200 billion.
The problems extend far beyond the military-industrial complex. Analysts say up to 75% of Russia's industries are in decline or stagnation, including metallurgy, coal mining, and construction, undermining businesses' ability to service their debts.
The Central Bank has begun tightening credit policies in an attempt to contain the deterioration, but experts warn that banks may soon require large-scale state bailouts.
For now, high oil and gas prices are partially cushioning the blow. But if they fall, risks will surge sharply, forcing the government to rescue banks and major corporationsâa move that could cost 10â20% of GDP.
Analysts predict that 2026 could be a turning point, as the accumulated problems threaten to trigger a sudden and severe financial downturn.
