russian Banks Building a Pyramid Scheme on Consumer Debt

While the key interest rate of the central bank of the rf remains at record highs and defaults on the debt market multiply every quarter, russian banks have found a way to remove problem assets from their balance sheets. The scheme is not new: consumer loans are packaged into pools, converted into bonds and sold to investors. This is called securitization.

The market for such securities soared in 2025 to $3.1 billion – five times more than a year earlier. In 2026, according to forecasts, it could reach $13.3 billion. Among buyers, every third person is a private investor. “sberbank”, “alfa-bank”, and “gazprombank” have joined the game. The yield on such securities exceeds corporate bonds by 2–4%. In a country where normal investment instruments are practically unavailable and deposit rates are being eaten up by inflation, even the illusion of profit sells well.

But there is a problem. The quality of the loans underlying these bonds is questionable. In some 2025 issues, the default rate reached 1.8% per month – and this was even before real incomes began to fall at an accelerated pace. If borrowers with lower solvency end up in the pools, the pretty packaging does not protect the investor from losses.

At the same time, the entire debt market of the rf is falling apart at the seams. In the first quarter of 2026 alone, about 10–11 technical defaults were recorded – almost half of the figure for the entire previous year. The most affected sectors are fuel retail, logistics and development. Up to a quarter of the entire bond market may be in the high-risk zone. A worse background for the rapid growth of a new instrument can hardly be created.

Securitization of consumer loans differs fundamentally from mortgage securities: there is no collateral in the form of real estate, there is only the borrower's ability to pay. Reduction in income, rising unemployment, further pressure on the consumer - and the quality of the collateral can quickly fall. Then the mechanism that was supposed to distribute risks will become a channel for their spread.

The growth of this market is not a sign of the development of russia’s financial system. It is a sign that there are already more problems in it than can be hidden by conventional methods.