Half a Million Russians Declare Bankruptcy Amid Ongoing Ukraine War in 2026

Half a million Russians declared bankruptcy in 2025 as the country's banking system struggled under the weight of the ongoing war in Ukraine, according to a European intelligence report released this week. The report highlights the challenges faced by Russia's economy, particularly as the Ministry of Economic Development revised its GDP forecast for 2026 from 1.3% to 0.4%.

Impact of the Ukraine War on Russia's Economy

The European intelligence report shows that the Russian government has increasingly relied on banks to support both businesses and everyday citizens amid the prolonged conflict. This reliance has led to an increase in risky loans, which, while keeping the war effort funded, has also heightened financial risks for individuals and businesses alike.

As the government pours resources into its military operations, many Russians are struggling with rising household debt, contributing to the alarming rate of bankruptcies. The report indicates that over 500,000 Russians declared bankruptcy in 2025, marking a nearly one-third increase from the previous year.

Rising Household Debt and Loan Defaults

According to the report, the banking sector has seen a significant rise in bad loans, with approximately 10% of corporate loans now classified as doubtful. This situation is exacerbated by state-backed credit programs that have encouraged more than 13 million Russians to take multiple loans simultaneously to cope with the rising cost of living.

• Overdue corporate loans total around 7 trillion roubles ($91 billion).
• More than 1.7 trillion roubles ($22 billion) are overdue loans to individuals.
• Bank profits for 2024 and 2025 were estimated at $80 billion to $90 billion.

Vladislav Inozemtsev, an associate fellow at Chatham House, noted that while overdue corporate loans primarily involve defense-related enterprises, the government is likely to ensure these debts are managed to avoid destabilizing the financial system.

Future Outlook for Russia's Banking Sector

The European intelligence report warns that the current reliance on government support and loan restructuring may be masking a potential banking crisis. Experts believe that an economic shock, such as new sanctions or increased defaults, could expose vulnerabilities within the banking system.

Despite these risks, the Russian central bank has downplayed concerns about an impending crisis. Inozemtsev asserts that the structure of Russia's banking system, which consists of a few large, heavily supervised banks, makes a full-blown crisis less likely. He stated, “Even if smaller banks fail and individuals face bankruptcy, it would not trigger a crisis in the country.”