More than half a million Russians filed for personal bankruptcy in 2025, according to a European intelligence report reviewed by Reuters. The figure represents a jump of nearly one-third from the previous year. Over 97 percent of cases were initiated by debtors themselves, people who could no longer pay what they owed.
The numbers are not disputable. Ukraine’s Foreign Intelligence Service put the count at 568,000, a 31 percent year-on-year increase. Al Jazeera, The Telegraph, and Reuters all report the same range. The trend is clear: ordinary Russians are drowning in debt.
The question is whether the banking system will follow them down.
Explosive risk
The intelligence report, prepared in June 2026 for European officials and titled “Note on the probability of a banking crisis in Russia in 2026,” warns that the situation is more dangerous than it looks.
“The situation creates the illusion of a dynamic economy that, in reality, conceals an explosive situation,” the report says.
The numbers behind that warning are stark. Corporate loans classified as problematic have reached about 10 percent of the total. Some major banks report retail non-performing loan ratios as high as 15 percent. More than 13 million Russians hold three or more simultaneous loans, driven by state lending programs that kept consumption afloat while wages stagnated.
Meanwhile, Russians are hiding cash from the banking system. More than 19 trillion rubles, roughly $243 billion, is now held outside banks, a 17 percent increase year-on-year. The outflow of funds from the banking sector reached $12.8 billion in 2025, leaving a structural liquidity deficit of $14.7 billion.
These are not the signs of a healthy economy.
The two-track economy
Russia’s wartime economy has split in two. Defense-linked industries have seen output rise about 50 percent compared to 2021. Civilian sectors have grown only 8 percent. The gap is not sustainable.
The government’s own numbers tell the story. GDP growth forecasts for 2026 have been cut from 1.3 percent to 0.4 percent. For 2027, from 2.8 percent to 1.4 percent. Russia’s realized budget deficit in 2025 was nearly 3 percent of GDP, far above the 0.5 percent target. Defense spending has climbed to about 7 percent of GDP. Debt servicing costs now consume nearly 9 percent of federal expenditure, double the share from 2021.
The National Welfare Fund, once Russia’s cushion against economic shock, has shrunk from about 6 percent of GDP in 2021 to less than 2 percent.
Unemployment sits at a historic 2 percent. But that is not strength, it reflects demographic collapse and war mobilization, combined with the flight of 500,000 to 1 million skilled workers who left the country after the invasion of Ukraine.
The energy lifeline frays
Oil revenues have been the Kremlin’s safety valve. But even that is leaking. The discount on Russian Urals crude relative to Brent reached $29 per barrel in February 2026, the widest spread since 2020. Rosneft’s profits fell 70 percent in the first nine months of 2025.
The European Union in June extended its sanctions on Russia to July 2027. A 21st sanctions package is being prepared, targeting more than 90 additional banks. That would bring the total number of sanctioned Russian banks to over 100, more than half of all internationally connected Russian financial institutions.
The European intelligence report warns that an ambitious new sanctions package could be the shock that triggers a banking crisis.
Official denial
The Russian central bank disputes the picture. Deputy Governor Filipp Gabunia says “vulnerabilities in the financial sector are not critical” and claims bad loans have stabilized at 4 percent. Sberbank CFO Taras Skvortsov says: “By 2026, everyone has become so used to sanctions.”
Some Western analysts agree. Chris Weafer of Macro Advisory told Reuters that “the idea that a fresh round will tip Russia into crisis is wishful thinking.”
But the data on bankruptcies, loan defaults, cash flight, and industrial divergence does not support the official optimism. Russia has spent three years fighting a war that its economy was not built to sustain. The half-million bankrupt Russians are not an anomaly. They are the leading indicator.
The Kremlin has kept the economy running through state spending, repression, and high oil prices. Each of those supports is weakening. When one gives way, the rest may follow faster than the central bank can respond.