A European state intelligence report has warned that Russia is at risk of an ‘explosive’ banking crisis due to the country’s war economy. The report, seen by Reuters, outlines the vulnerability of Russian banks to further Western sanctions.

Russia’s Banking Sector

Russia’s banks have mostly weathered the sanctions imposed since Moscow’s 2022 full-scale invasion of Ukraine. However, the report says that deteriorating loans and growing household indebtedness create an ‘explosive’ risk, just as the EU prepares a new package of sanctions targeting banks and cryptocurrency networks.

The Russian central bank has declined to comment on the assessment, although it has recently played down the risks of a major banking crisis. With the cost of a four-year war with Ukraine draining state coffers, Russia has increasingly relied on banks to support companies and borrowers.

Sanctions and Their Impact

The European Union has imposed sweeping sanctions on Russia in an attempt to choke bank profits and international money movements, oil and gas sales, and the defense sector. Russia has struggled but proven largely resilient, while Europe has often had difficulty enforcing sanctions.

The report estimates that 10% of corporate loans are doubtful, a sharp increase from 2024, while some major banks reported retail non-performing loan ratios as high as 15% in 2025. More than 500,000 Russians declared bankruptcy in 2025, up almost a third from the previous year.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.