It has been revealed that profits at Russian banks may be bruised in 2009 if bad loans increase to 10% of credit portfolios.

The warning came from Russia’s central banks forecast, which stated that money must be spent on recapitalising, if the banks are to weather the financial storm.

During the month of May, Russian bank’s capital decreased by 0.5%, which was the first decline since August 2004, while growth in non-performing loans slowed.

As a result, Prime Minister Vladimir Putin, in June, ordered the state’s banks to boost lending by around $15 billion over the next three months as bad loans started to rise.

Therefore, in an attempt to regain economic control, Russia will spend 150 billion roubles in 2009 and 310 billion roubles in 2010 on recapitalising the banking system via treasury bills.

The Central Bank chairman stated that the chances of Russia facing a second banking crisis were "negligible."

Anton Karamzin, the Chief Financial Officer said at a conference call with investors: "Even if the rest of the world is seeing more green shoots, the structure of the Russian economy is such that 2010 and throughout the rest of the year is still going to be quite difficult."