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Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 16 December 2022

16 December 2022

Good afternoon,

Today, the Bank of Russia has decided to keep the key rate at 7.50% per annum.

Current price growth rates are moderate, and consumer demand is subdued. Nonetheless, there have been signs of rising pressure on prices recently. Among proinflationary factors, I would focus on elevated inflation expectations, staff shortages in certain sectors, supply-side constraints, the expansion of the budget deficit, and a worsening of the external trade conditions. We will take into account the impact of these factors when pursuing our monetary policy. I would like to remind you that our objective is to bring inflation back to the target in 2024. Our forecast for the next year remains in the range of 5–7%.

I would now dwell on the reasons behind our today’s decision.

First of all, I would like to talk of inflation.

In November and early December, prices were rising primarily because of one-off factors, namely the indexation of the housing and utility rates in the first place. However, the influence of factors pushing up steady inflation is becoming stronger. This trend will continue next year. What are these factors?

Firstly, households’ and businesses’ inflation expectations remain elevated. Currently, they are not causing a rise in consumer activity because households are cautious about large purchases and still prefer savings, but the situation might turn around.

Secondly, as the deficit of manpower has increased, companies’ labour costs are growing. This is especially evident in the industrial sector, transport, logistics, and construction. If wages grow faster than labour productivity, this might entail an additional rise in prices through businesses’ costs. 

Another factor pushing up costs is associated with companies’ adjustment to the changing conditions. Companies continue to search for new suppliers, alternatives logistics and settlement methods and address challenging issues of new equipment imports and repairs of the already installed production lines. To a greater or lesser extent, enterprises will pass their labour costs through into prices for end consumers.

Finally, this is fiscal policy. The Ministry of Finance has raised its estimate of the budget deficit from 0.9% to 2% of GDP for this year. We took this into account when making our today’s decision and will adjust our forecast accordingly after our core meeting in February. Currently, I can give the following comment: both monetary and fiscal policies impact aggregate demand. If the flow of money through the budget channel goes up, it might become necessary to contain the inflow through the credit channel in order to ensure price stability. Therefore, all else being equal, more expansionary fiscal policy involves a higher level of interest rates.

I would briefly talk of annual inflation. It will continue to slow down in the next few months as the months of this year that were the ‘heaviest’ in terms of price growth rates will be gradually excluded from its calculation. When inflation is highly volatile, its annual rate is not very informative about the pressure on prices as it is overloaded with previous shocks. In spring, annual inflation might drop even below 4%, but this will hardly characterise price trends ‘here and now’ or ‘there and then’. In such situations, when making our decisions, we are focusing more on our forecast and current indicators of steady pressure on prices adjusted for one-off factors.

Secondly, I will now speak of the economic situation.

The external trade restrictions continue to create challenges for companies. This month, they were exacerbated by the embargo on oil exports that became effective and the introduction of the oil price cap. We will present the estimate of their effects in our updated forecast in February.

Business activity was bouncing back in October, after its decline in the previous month. Business surveys suggest that this upward trend continued in November as well. After dropping in October, the Bank of Russia’s Business Climate Index went up. Companies’ current estimates and expectations about output and demand have improved, especially in services.

Speaking of investment activity, a slowdown in private investment is partially offset by an increase in government investment. As to regions, the expansion of investment has been most significant in the Far East. This region is actively constructing and upgrading its transport and logistics infrastructure to improve its throughput capacity. Imports through the Eastern seaports have already exceeded last year’s figures by a fourth. Debottlenecking is crucial for the structural transformation of the economy. More details about investment activity in Russian regions is provided in the December report ‘Regional Economy’.

Consumer activity is highly uneven across regions. Moscow and Saint Petersburg have faced a slump in consumption, whereas the Urals, the Far East and the South of Russia record approximately the same level of consumer demand as during the previous year. Overall, we characterise demand as moderate. Households still prefer to save.

Thirdly, monetary conditions remain neutral overall. 

After rising in September, yields on federal government bonds have changed only slightly. However, the slope of the curve has become a little steeper, that is, short-term yields have adjusted downwards, while long-term yields remained the same. This reflects the persistently higher geopolitical risks, elevated inflation expectations, and the expansion of the government borrowings.

Overall, lending conditions have not been limiting credit activity. Growth rates in corporate and mortgage lending have been high. Disbursements of unsecured consumer loans have been rebounding. Deposit rates have continued to adjust to higher yields on federal government bonds that rose in September. This contributed to a slight inflow of funds into deposits.

The dedollarisation of banks’ balance sheets has continued in recent months. The structure of the demand for money is changing. Instead of foreign currency, ruble is used increasingly more extensively to make payments, raise investment, and form savings. This has considerably boosted ruble money supply (the M2 aggregate), which has been widely noticed. Nevertheless, the broad money indicator (the M2X aggregate) is more informative as it also covers deposits and accounts in foreign currency. This indicator is growing at a pace not exceeding annual inflation.

I will now speak of the risks that might cause a deviation of inflation from the baseline forecast. Short-term risks have shifted towards proinflationary ones, and their list has expanded.

As before, we see the risks of a more considerable downturn in the world economy than assumed in our baseline scenario, although there are recent data about a slowdown of inflation in some advanced economies and, accordingly, lower risks of an excessive tightening of their monetary policies.

As regards external conditions, the economy is affected by the sanctions. The introduction of the embargo and the price cap for Russian crude occurred simultaneously with a decline in global prices for hydrocarbons caused by a worsening of global economic prospects. A long period of low prices or their additional significant reduction might entail a steady loss of revenues for exporters, involve a faster contraction of the balance of trade, putting pressure on the ruble which would mean also a faster decline in the trading balance.

An important group of risks is associated with the situation in the labour market. Staff shortages are likely to become more acute further. Consequently, not only unemployment might drop to a record low next year, but also wages might grow significantly faster than labour productivity.

Finally, a possible expansion of the budget deficit, compared to the current plan, might also become a proinflationary risk. 

The group of disinflationary risks is weaker. They include a situation where households’ propensity to save remains at the current level or increases, as well as higher credit risks in the economy. The latter will cause a rise in risk costs that banks include in their credit rates. Moreover, in a situation of higher uncertainty, banks might tighten their requirements for borrowers and collaterals even more. All this might cool down lending and, consequently, contain inflation. So this cooling down of lending activity will be a consequence of the above-mentioned and deter upward trends.

Winding up, I would like to comment on our future decisions.

The economy continues to adapt to the current changes. We will analyse the information about the progress of companies’ adjustment to the new environment, trends in consumers’ behaviour and inflation expectations, changes in the external conditions, and the expansion of government demand. Considering all the incoming data, the Bank of Russia will determine the path of the key rate so as not to hinder the structural transformation of the economy and ensure the return of inflation to the target of close to 4% in 2024.

Thank you for attention.

Q&A for the Media

QUESTION from Interfax:

There was no signal in your statement. Can this be interpreted as a possible change in the key rate both upwards and downwards in the future? As proinflationary risks have increased, as you note, how probable is it that the Bank of Russia will tighten its monetary policy, that is, will shift towards moderately tight monetary policy in the medium term?

One more question, if I may. You have said that you will assess and take into account the imposed embargo and price cap for Russian crude. But could you estimate already now whether this is a really serious risk of a decline in economic activity in Russia and whether this situation might be classified as a shock?


We have given a neutral signal. This means that our next decision on the key rate path will depend on incoming data and the prevalence of proinflationary or disinflationary factors. However, as I have already stressed, we believe that proinflationary factors currently prevail over both the medium- and short-term horizon. Therefore, I would like to repeat that key rate movements will depend on incoming data: we can keep it unchanged, raise it, or cut it if the disinflationary factor that we now consider to be weak materialises.

As to the impact of the embargo, it is currently rather hard to estimate all its effects, but we will try to do this at our core meeting in February when we will update our forecast. We will have more information then, including about Russia’s response, and we will take this into account in February.

QUESTION from TASS Agency:

I have several questions. The first one is as follows. It was reported in mass media that the authorities were discussing an instalment mechanism for housing purchases by certain categories of individuals. What is the Bank of Russia’s opinion regarding this initiative? When might it be launched if this is already under discussion?

Besides, the Central Bank has emphasised several times that it will reduce the impact of ‘toxic’ currencies and has even announced that it will set buffers for corporate loans in ‘toxic’ currencies. Could you please comment when this will be introduced and whether the Bank of Russia is preparing any other mechanisms to decrease the amount of ‘toxic’ currencies on Russian banks’ balance sheets?

I have one more question about the Central Bank’s transaction with Bank Otkritie and VTB Bank. At what stage is it now? Is it already clear what will happen with Bank Otkritie executives as mass media reported that they were to leave the bank?


As regards possible instalment mechanisms for housing purchases, we have not discussed them in detail. When we receive detailed suggestions, we will certainly consider them.

Speaking of the reduction in the proportion of the so-called ‘toxic’ currencies on banks’ balance sheets, indeed, there are now new opportunities for us to establish differentiated buffers depending on the type of currency. Today, we can see no need in using such instruments. We will monitor how banks’ balance sheets and open foreign currency positions will be changing, and, what is most important, whether their combinations of currencies are well-balanced as there are now serious changes happening, and we will apply these mechanisms if necessary.

As to the sale of Bank Otkritie, the transaction is currently at its final stage. We do intend to close this transaction until the end of the year.

QUESTION from Kommersant:

In your statement, you mentioned four groups of risks. Understandably, you cannot assess them in terms of the probability of how they might materialise. But could you prioritise them by their potential weight over a six-month horizon?


I would rather not assess them by their probability or weight as a lot will depend on their combination as well. However, we believe that they all should be carefully monitored. You are probably talking of proinflationary risks. Of course, they also include inflation expectations that stay elevated although the current inflation rate has remained decreased during several months already. Generally, inflation expectations follow the actual inflation rate. However, we can see that they still stay elevated, and we are concerned about this. Other factors that I have also mentioned, including those related to the budget, external restrictions, and the labour market that we are currently monitoring attentively, also exist, they are interconnected somehow and thus have a combined effect on the situation. This is always a matter of the discussion at the Board of Directors meetings and a collective opinion regarding the impact of these risks in general.


I have several questions. The first one is about the suggestion of the Ministry of Finance to standardise payments on federal government (OFZ) bonds so that foreigners could also obtain them directly, as requested, and not to C-type accounts as they do now. Does the Bank of Russia support this suggestion? At what stage is it now?

Another question is about reporting. Your former colleague Sergey Shvetsov noted recently that companies should either disclose their reporting or give adequate explanations for their refusal to disclose reporting. He also suggested that control over the content of such explanations should be exercised by the Central Bank, among others. What is the Bank of Russia’s opinion about this initiative and is it ready to perform this control function? Is it generally necessary to require companies to disclose reporting or provide explanations?

I have another short question about the situation with the fund that is supposed to be used to pay compensations to investors. At what stage is its development now?


Speaking of the suggestion to standardise, as you say, the receipt of coupon yield on OFZ bonds, we believe that this issue should be definitely considered with due regard to the required protection of the interests of the Russian entities whose assets have been blocked in foreign jurisdictions due to the imposed sanctions. Furthermore, I would like to emphasise once again that foreign entities in the Russian jurisdiction have not been deprived of their right to receive payments on OFZ bonds. This is true, they are credited to C-type accounts, but the funds in C-type accounts can be reinvested, including in the OFZ market, and used to make tax payments or pay other fees. Hence, I believe that this issue should be considered comprehensively.

As regards reporting disclosure, I would like to remind you that the government resolution permitting issuers not to disclose either any information or a part of it will remain effective until 1 July. The Central Bank’s opinion is that, after 1 July, they should disclose information and the procedure that is in place should be effective. The current procedure does not provide for any explanations or the submission of any explanations.

We believe that, after 1 July, there should be a procedure limiting disclosures. Issuers should notify the Central Bank if they do not disclose information. The Central Bank then checks whether this is in line with the established rules limiting disclosures. We are now discussing whether it is needed to expand such limits depending on information sensitivity, but, overall, we believe that we need to shift towards disclosing more information. Indeed, sensitive information can be an exception, but the list of such information should not be very long as it is critical for investors to receive information. We expect that the capital market will develop. For investors to be able to invest in securities, we certainly need to return to the normal procedure for disclosing information, although with some limits, as I have said already. Compliance with these limits — not explanations from certain issuers, but exactly compliance with the established limits — can be checked by the Central Bank, as it is now performed according to the procedure.

As regards the development of the scheme for compensation or partial compensation of yields that investors do not receive through the DIA, this is a complicated issue, and it is currently under discussion. At the moment, there is still no significant progress in this issue.

QUESTION from Vecherny Saint Petersburg:

I’ve got a somewhat banal question, but I think it is interesting. According to the published data, the Bank of Russia lent 1.4 trillion rubles to commercial banks in early November. They mostly used these funds to purchase OFZ bonds from the Ministry of Finance. Certain estimates show that, as a result of this, the Ministry of Finance managed to raise a record-high amount by selling OFZ bonds, namely about 1.2 trillion rubles as of the end of November. Moreover, on 16 November, the amount raised over one day — 823 billion rubles — was record-breaking. The situation repeated in early December: on 5 December, the Bank of Russia lent another 1 trillion rubles, and on 7 December, the Ministry of Finance set a new record by raising another 832 billion rubles.

Possibly, we might assume that this is the way how the budget deficit is financed. In this regard, I’ve got two questions. Can we say that this is a Russian version of a quantitative easing? And another question. What is the level of the ruble weakening in this regard that the Central Bank assumes to be acceptable?


The Ministry of Finance has indeed increased OFZ offerings in recent months, while the main budget expenditures are usually shifted towards the end of the year. Those operations that we carry out — repos — enable us to support banks’ liquidity before they receive required payments from the budget. This reduces interest rate volatility in the money market. This is not a unique situation. We did this in 2020 when the Ministry of Finance borrowed a sufficiently large amount of funds, banks used our repos, and nearly all of them then repaid these repo funds at the beginning of the year after budget funds had been credited to the banks’ accounts. Repos are transactions settled on a repayable basis. Indeed, in November, banks raised 1.4 trillion rubles for one month. In December, the banks repaid these funds; and in December, they borrowed already 1 trillion rubles, that is, a smaller amount. We expect that they will reduce the amount of borrowings in January as well after the December expenditures are credited to their accounts and that the demand at the auction will be considerably lower in January.

Repos differ from the so-called quantitative easing in both their form and objective. Within quantitative easing programmes, central banks purchase securities, and the structure of the central banks’ balance sheets changes if not irreversibly, but at least for a sufficiently long period until they start selling these securities. As I have already said, repos are settled on a repayable basis and, moreover, can be terminated at any moment. Quantitative easing programmes were implemented by other countries when they already had no opportunities to cut their policy rates and this was done to speed up inflation, that is, not so much to finance their budget deficit, but rather to impact inflation when interest rates were low or close to zero. The Bank of Russia’s repos do not result in a monetary policy easing and, accordingly, have no effect on the exchange rate.

QUESTION from RIA Novosti:

I have two questions as well.

The first one is as follows. In your statement after the key rate meeting today, you said that economic activity had nonetheless improved slightly in the fourth quarter. Hence, my question is as follows. What is your forecast of the GDP decline this year? Will it be around 2.5% or does the Bank of Russia still assume a more pessimistic estimate and what will be the situation next year or will it be possible not to exceed 1%?

And the second question, please. You have just said that, in spring, annual inflation might decrease even below 4%. Does this mean that the Central Bank considers it possible to achieve the inflation target already in 2023 and not in 2024.


As regards GDP this year, you probably remember our latest forecast that we presented in October: −3—(-3.5)%. We expect that the GDP decline will be close to the upper bound, that is, more probably close to 3%, but a lot certainly depends on economic activity trends in November and December. If they are positive, GDP might decline by even less than 3% this year. We will adjust our forecast for next year in February, taking into account all those factors that we currently observe, that have already materialised.

Speaking of a reduction in annual inflation below 4% next year, this might happen in spring. Overall, this does not mean that it will drop below the target. Our forecast for the year in general is 5–7%. Annual inflation will go down in spring due to the base effect. These are steady components of inflation that really matter. They have stayed below our 4% target for a long time, but now we can see that the pressure on prices might strengthen and proinflationary risks are rising. Hence, this is what we will focus on. Our objective is to bring inflation back to 4% in 2024. For this, we will focus primarily on the steady factors of inflation.

QUESTION from Bloomberg:

In recent years, the Ministry of Finance has undertaken a lot, that is, a record amount of obligations with related payments linked to the key rate. These are not only floating coupon OFZ bonds, but also subsidised mortgage lending and loans to small and medium-sized businesses. According to economists, these obligations total nearly 15 trillion rubles, that is, an increase in the key rate by one percentage point a year might cost approximately 150 billion rubles to the budget. Are there any risks that such sensitivity of government expenditures to the key rate will be a limit for you in increasing it? Generally, the Ministry of Finance is probably already now engaged in determining the level of the key rate? This is my first question.

One more question to continue an earlier topic. You have said that the transaction with Bank Otkritie and VTB Bank will soon be closed, that is, you will change Otkritie for OFZ bonds from VTB. Could you explain in plain language why the Central Bank needed this and what is its strategy in this regard? You were investing funds in Otkritie for so long to subsequently liquidate it for the sake of supposed support for a distressed state-owned bank?


Speaking of our decisions on the key rate, this does not increase in any way the proportion of expenses subsidised by the Ministry of Finance. We make our key rate decisions guided by our analysis of the situation and our forecast and, hence, our main objective in this respect is to return inflation to 4% and maintain it close to this target.

As regards the Central Bank’s sale of Bank Otkritie, I have already explained multiple times that, originally, when were forced to accept Otkritie to carry out its financial resolution, we actually performed the functions of its owner and considered this situation to be temporary, planning to divest from the banks as soon as possible. We are a regulator and a supervisory authority and, of course, owning a bank is not normal for us. Therefore, as soon as we completed the financial resolution of the bank, we immediately started preparations for its sale. We were going to sell it in the market, including through IPO, but this became almost impossible due to the changes in the situation. However, we believe it necessary to sell the bank and, for this reason, we consider that this transaction is exactly what will support the development of the banking sector without the engagement of the Central Bank as an owner.

QUESTION from the Life and Invest project:

The Bank of Russia issued a letter requesting brokers to help clients in submitting individual applications for unblocking. It also had an attached list of documents required to submit such an application. We have faced a situation where a number of brokers are not ready to provide some documents for multiple reasons, including contracts with the high-level depository. What can investors do in this case, especially those who, for various reasons, have not been included in those collective unblocking applications submitted by brokers?

And another question please. How investors can check whether they have been included in a broker’s collective application? For instance, one of the brokers whom I’ve personally addressed has responded that I should send them a letter through Russian Post in order to receive a confirmation that I am on the list. Basically, if I send such a letter today, I will find out that I am not on the list two weeks later and thus I will have no time then for getting on the list. What investors should better apply for individual unblocking and what categories of investors should not do this, in your opinion? How do you generally estimate the prospects of collective requests that are currently submitted by brokers?


I would rather start with the last question. The decision on applying for the unblocking of frozen assets should definitely be made by investors at their own discretion. Indeed, we have recommended financial institutions that they should help their clients by providing information and documents if investors make a decision to submit such a request and apply on their own to administrative and judicial bodies in other jurisdictions. I would like to say that, of course, there are no guarantees of unblocking in this case and we will be unable to estimate this probability as the decision is to be made by another jurisdiction. However, we would still advise financial institutions to help their clients. You are saying that there are refusals. We would like to receive information about these refusals so as to discuss this issue with financial institutions because we believe that they should help their clients in this situation.

Additionally, we have asked financial institutions to inform their clients of possible expenses associated with the submission of individual requests as these expenses might be quite large if lawsuits are filed to challenge the decisions made by administrative or judicial authorities. In some cases, these expenses might even exceed the value of frozen assets. Therefore, such informing of clients about their potential costs is certainly necessary for them to make informed decisions.

You have said that investors need information about whether they have been included in a collective suit. Accordingly, if financial institutions refuse to provide such information, we will see how to address this problem. I am sure that investors should definitely receive the information on whether they have been included in a collective suit or not so as to be able to protect their interests.

QUESTION from UralBusinessConsulting:

Is it reasonable to underestimate the influence of the rise in fruit and vegetable prices? In November, the price growth in this product group in Russia ranged from 0.1% to 11%, whereas, over the year, all fruit and vegetables in Russia became cheaper by 4% in nominal terms.

How do you take into account such regional differences in price movements when making key rate decisions? What is the regulator’s forecast for this segment as of the end of 2022?


Indeed, fruit and vegetable prices are always characterised by high volatility. As you know, when speaking of possible risks and one-off factors, we are talking of potential changes in fruit and vegetable prices as they strongly depend on a season.

We can observe the highest prices in spring and the lowest prices — in summer and early autumn. Generally, fruit and vegetable prices drop by a fourth in summer, that is, they are volatile.

However, it is worth saying that, basically, the higher is inflation (the overall price growth rate), the larger might be the variance in prices across regions. We could see this in spring when inflation peaked. The variance across regions was very wide. It is now narrowing, but this variance across regions will remain overall. This depends not only on the general level of inflation.

I would like to stress once again: the higher is inflation, the larger is the variance and vice versa — the lower is inflation, the smaller is this variance. However, structural factors matter as well, including whether regions have a well-developed agricultural sector, effective demand, and a sufficient level of competition in food markets. All this impacts fruit and vegetable prices in each particular region.

Before each meeting of the Board of Directors, we study information from our regional branches about what is happening in the regions. Of course, we make our decisions depending on the trends and forecast of inflation and other indicators in the country in general, but the understanding of such a difference in the factors influencing prices for all products, including fruit and vegetables, helps us identify emerging trends and factors behind these trends and, probably, get a more accurate view, assessment of the situation and forecast in general.

In other words, we definitely take into account these data when preparing the Bank of Russia Board of Directors’ opinion regarding the situation and future trends, but we certainly make our decisions considering the dynamics of indicators across the country in general.

QUESTION from Rossiyskaya Gazeta:

My first question is about your today’s statement that the new sanctions on Russian crude imposed simultaneously with the decline in global oil prices might cause additional pressure on the ruble. How strong might this pressure be, considering the current situation?

My second question is about the dedollarisation of the economy: today, the level of foreign currency deposits has decreased below 10%. The highest level above 30% was in 2015.

Is there any level of foreign currency retail deposits that the Bank of Russia considers comfortable?


I would like to ask Mr Zabotkin to start answering the first question and maybe the second one as well.


Indeed, judging by the actual exchange rate dynamics, we can see that the situation with oil prices, both globally and specifically in relation to Russian oil exports, does affect the exchange rate. The exchange rate has shifted and, currently, it is still in the same range where it has been fluctuating from the beginning of summer, but close to the upper bound of this range.

Thus, all else being equal, a considerable worsening of trade conditions would really entail a weakening of the exchange rate. To put it in a more detailed manner, considering that the Bank of Russia generally does not announce any exchange rate forecasts, I would say that it is quite difficult to comment on this, but, overall, as Ms Nabiullina has noted, in terms of risks to our baseline forecast, we consider risks related to external conditions as proinflationary for 2023.


Speaking of the so-called comfortable level of foreign currency retail deposits with banks, there are no such estimates. There are multiple studies on this issue, when the dollarisation of deposits above a certain level involves high risks for financial stability, because we know that we also had an elevated level of foreign currency deposits in certain countries and in certain situations, but the estimates vary: more than 30%, more than 50%.

There is an expert opinion that the level below 15% is more or less comfortable. We do not make such estimates. Households will always have a certain amount of foreign currency deposits. Currently, we can see that the proportion of foreign currency retail deposits has really decreased, with its structure changing as there are now deposits in Chinese yuan. This process is underway, and people choose foreign currencies for their deposits at their own discretion.

QUESTION from Frank Media:

I’ve got three questions, if I may.

The first one is also related to deposits, but those that Russian households have withdrawn abroad, rather than those held in foreign currency in Russia. Your statistics show that their amount has reached 66 billion US dollars, which is nearly 4 trillion rubles. Is not such a situation a matter of concern for the Central Bank? I would like to ask more accurately, if I may. Do you have any ideas of what can be done to return these funds to Russia. Is this needed at all?

My second question is as follows. Are you fine with the proposal of the Ministry of Construction regarding mortgage loans from developers? As you remember, the Ministry of Construction proposed that interest rates under such programmes should be 4%. Overall, what is your opinion about the decision to extend the subsidised programme?

And the last question, please. Currently, negotiations are underway about the repayment to the Government of a part of the subordinated anti-crisis loan issued to Sberbank back in 2008–2009. Does the Bank of Russia expect these funds to return to the banking system after some time?


As regards the withdrawal of funds, cash abroad, no, this is not a matter of concern for us in the current situation. We do not consider it necessary to take any special measures in this connection. As confidence in macroeconomic stability, price stability strengthens, these funds will return to the Russian banking system, to rubles. Hence, our objective is exactly to ensure price stability and return inflation to its 4% target. Thus, people will have fewer reasons to be concerned that their ruble savings might be absorbed by inflation. Therefore, we believe that this should be achieved through economic stimuli and normal market incentives.

Speaking of mortgage loans from developers, our opinion is that these schemes should be decreased and closed. We can see that these schemes involve exaggerated housing prices. When people have housing that is overvalued as compared to market prices and, when they need it, are unable to sell it in the secondary market for the same price that they expected when raising a loan, this will be a problem for people, a problem with repaying mortgage loans. There might even be cases when they will still have debt to the bank after the sale of such housing. This is why we are going to change this system through banking regulation.

As to subsidised mortgage lending, the relevant decision has been made. Subsidised mortgage lending is aimed at helping both construction companies and the economy. What is important for us? We will monitor the quality of mortgages. We have all necessary instruments for this in order to prevent an increase in high-risk mortgage loans. We have macroprudential measures to address this issue.

I would like to stress once again: we do have measures to limit mortgage lending from developers, tranche mortgage loans, and various scheme-based mechanisms of that sort. We are determined about this and have already applied to the Government so that subsidised lending programmes do not cover such schemes in any way.

QUESTION from Russia 24 TV channel:

I have a question about the EU continuing to discuss a possible use of the frozen Russian assets to provide aid to Ukraine. How probable is this, in your opinion? What is the Central Bank doing to return these funds?


We cannot comment on how difficult and hard it is and how high the probability is. We do see these discussions. Speaking of the frozen Russian assets, we are finalising our legal position within the work for returning these assets, but this is a complicated issue.

QUESTION from Frank Media:

My first question is as follows. Has the government commission discussed and permitted Banca Intesa shareholders to sell their asset in Russia? Is the government commission currently discussing similar decisions for any other banks that have Russian subsidiaries?

And another question, please. Why does the Bank of Russia object to regulatory sandboxes with cryptocurrency in Russia and what aspects of this issue is a matter of concern for you?


Speaking of the receipt of permits, we do not comment on such issues until the decisions are made.

As regards purchasing banks’ equity stakes, I can only say that there are such requests indeed. The government commission is considering them according to the established procedure.

As to regulatory sandboxes, we believe that transactions inside the country through an authorised organisation can be considered within a regulatory sandbox, but this requires a special law to be adopted.

What we have always objected to is the use of cryptocurrency as a means of payment in the first place.

Secondly, it cannot be a means of investment in financial assets for retail investors as this is a high-risk and very volatile asset. In view of this, to ensure the protection of investors’ rights, we consider it unreasonable to provide such access to investors.

Would you like to add anything, Mr Zabotkin?


 Probably, I could give a brief additional comment. If we allow the free circulation of cryptocurrency as an investment instrument inside the country, then inevitably, when more people start to hold it, cryptocurrency will be used more broadly and will be extensively used as a means of payment, and in this case, it will be impossible to counteract this. This is why, the only thing for which the regulatory sandbox will be available, provided that the relevant decision is made, is the use of cryptoassets to support external economic activity.

QUESTION from Infopro54, Novosibirsk:

How high is the probability of affordable investment loans for businesses that are implementing import substitution projects?


First of all, there are investment loans already, including for businesses that are implementing import substitution projects.

Clearly, businesses are raising the issue of expanding the opportunities for receiving investment loans. However, I would like to emphasise that, basically, an investment loan is a loan issued for more than three years. And such loans with maturities of over three years have increased by 14.5% in annualised terms, and they are still growing. By the way, the interest rate on them has declined. When it peaked in March—April, it was about 11%, or even close to 12%, whereas now it is approximately 9%, which improves the affordability of investment loans.

There are two main factors to ensure their affordability.

The first one is price stability, as banks take into account their forecast of inflation when issuing long-term loans, because the money should be repaid with account of this inflation rate. The higher is expected inflation, the higher is the interest rate on long-term loans, including investment loans. Therefore, when inflation slows down, the cost of investment loans declines as well.

Secondly, we are preparing amendments to the banking regulation. They will address risk weights, provisions in order to shift banks’ focus in corporate lending towards financing transformation projects that are generally investment projects.

Currently, we are developing the taxonomy of such projects jointly with the Government. This taxonomy is not a list of projects, but the criteria, which is aimed at encouraging banks to finance such projects.

QUESTION from Interfax:

I’ve got three questions. The first one is as follows. Could you give an assessment of banks’ financial performance in 2022? At the end of the day, will the sector be able to break even or will it be in the red? Could you please give your estimate for 2023 about the situation with banks and whether they will be profit-making in 2023.

My second question is about the banking sector support fund. This is an issue that is currently under discussion at the Bank of Russia. Could you please comment on the reasons why the Central Bank has initiated this? Technically, there are already several support mechanisms. Why is it needed? What is banks’ opinion about this idea as it will involve costs for them?

My third question is to continue the topic of Bank Otkritie and VTB Bank. Market participants do question whether the bank is solvent as a buyer, considering that, recently, it has discontinued coupon payments on subordinated bonds. Generally, there is the following question. How can the Central Bank approve the transaction if the bank temporarily refuses to make payments to the holders of its bonds? This is kind of illogical. Could you please comment on this situation?


As regards the financial performance in 2022, I would not give any specific assessments right now as it would be premature. Nonetheless, I can say the banking sector has reduced its losses as compared to the middle of the summer. Most banks have made profit. Hence, we expect the banking sector to be profit-making in 2023.

Speaking of the banking sector support fund, this is an issue that we have started to discuss, and this discussion will take time. Of course, we will return to it as a practical mechanism, to its potential implementation a few years later, but we consider it important to discuss already now such future system-level mechanisms when the banking system creates collective buffers to be used in case of a crisis. Today, banks create their individual buffers, including owing to the add-ons that we have established. They have been using these individual buffers very extensively. The capital cushion formed by banks on an individual basis has helped them absorb the losses of the banking sector. This was the case both during the pandemic and this year.

We believe that it is critical to have a collective buffer in case of any scenarios that might involve, among other things, systemic risks for banks. This buffer can be created by banks. We will continue discussing this idea, but we consider it useful. It is essential to form such collective buffers instead of using the budget in a situation where the system might need a capital increase.

Indeed, this time, we did not have to apply to the budget, but individual buffers have turned out to be efficient, just as our regulatory easing. However, to improve the banking sector’s resilience to any possible scenarios of systemic crises, it is crucial to have such collective buffers. We will continue to discuss this topic.

As to the transaction with VTB and Otkritie, we have no doubts about the solvency of the buyer.

QUESTION from the Profinansy project:

My first question is about individual investment accounts. Mass media regularly report that there will be a certain amendment to change the mechanism of IIAs. This information has been published for about 18 months already. Investors have even started saying: ‘They will change everything there in any case...is it worth opening an IIA at all?’ and so on.

Hence, my question is as follows. Are these changes to happen in 2023 or is it possible to use these accounts during 2023, as before, and to raise these questions later?

And another question please. What would you advise to Russian private investors making investment in Russian assets for 2023?


I would start out with the question about IIAs. First of all, the mechanism of IIAs itself has turned out to be highly demanded and attractive, and we can see that many individuals invest funds through IIAs.

Indeed, there are plans for reforming the system of IIAs. We have been working jointly with the Ministry of Finance regarding this issue and have already aligned our positions. However, further on, a lot will depend on how the future discussion progresses and whether the legislative authorities make the decision in 2023. In other words, we expect this law to be approved in 2023. After this, IIA-3 will replace IIA-1 and IIA-2. By the way, IIA-3 will combine tax deductions, IIA-2 and IIA-3. We believe that it will become attractive.

However, according to our estimate, this mechanism will start functioning from 2024 at the earliest, that is, IIA-1 and IIA-2 can be opened in 2023, but anyway until the moment when this decision is made. This is because it will not be possible to open IIA-1 and IIA-2 after the introduction of IIA-3, if the law is approved in its current version.

Older IIA-1 and IIA-2 will remain effective until an individual decides to open an IIA-3. If individuals decide to open IIA-3, then IIA-1 and IIA-2 will be closed. If investors do not make such a decision, previously opened IIA-1 and IIA-2 will remain effective. It will not be allowed to open new IIAs, but only after the law is adopted. By now, this law has not been submitted to the State Duma yet. Therefore, the previous scheme with IIA-1 and IIA-2 remains in place.

The second question was about advice. The first thing I would like to say is that individual investment in the securities market certainly requires expertise, knowledge of the economy and finance.

In our opinion, qualified investors will be able to adequately assess the situation on their own due to their knowledge and to understand where to invest, what are the best options for them.

However, we are rather talking of newbie investors. The best option for them would be to address professional managers. These can be unit investment funds, or trustees, or investment advisers who will be able to propose a strategy depending on the profile of future investors, so to speak, their expectations about returns and risk appetite.

Nevertheless, investors should always be aware that investment in the securities market involves risks. These risks differ depending on financial instruments and quality characteristics. Basically, the higher are returns, the higher is risk. This is what investors should be aware of.

What I would like to emphasise, what is essential is that, in our opinion, an investor is a person who already has a safety cushion in the form of risk-free savings. In other words, investors should have funds that will allow them to cover their minimum needs in case of income loss: to purchase food, pay for housing and utility services, repay a mortgage loan, and so on.

If a person does not have such a cushion, it is definitely necessary to form such cushion of savings before entering the market of investment in order to feel confident, including in the securities market.

QUESTION from Vedomosti:

Recently, Vedomosti has found out that the Ministry of Finance is planning to combine mandatory and voluntary health insurance and is discussing this topic with market participants. What is the position of the Central Bank on this issue and is it participating in this discussion? 


Such a discussion certainly requires a serious assessment of all pros and cons. There are probably advantages as well. However, we believe that the market of voluntary health insurance has been actively developing. We will continue participating in this discussion. It is a very serious issue, but the discussion is now at a very early stage.

QUESTION from Reuters:

First of all, I would like to ask you about the options you discussed today. Did you consider a key rate cut, for instance?

The Bank of Russia expects the economy to decline next year as well. The decline in GDP is estimated at 1–4%. Is there any risk that this forecast might worsen due to the impact of the mobilisation on the reduction in the labour force in Russia?

My third question is about Otkritie. Could you announce the price to us today?


As regards the first question, we had a broad consensus today that the key rate should be kept unchanged. The discussion was about the signal, and there was a suggestion to tighten the signal.

As to GDP, I would like to ask Mr Zabotkin to comment on this.


Our October forecast of GDP at −3−(-3.5)% in 2022 was formed already more than a month after the announcement of the partial mobilisation and we believe that this forecast reflects the first-round effects adequately. Further on, we will adjust it as we receive new data.

However, as you know, both expectations in our macroeconomic forecast and expectations in comments and mass media suggest that the result of 2022 will likely be even better than −3−(-3.5)%, rather than worse than this range.

The forecast for 2023 will be adjusted in February, but I would like to stress that, in some cases, the high base of 2022 might decrease the result of 2023, as compared to 2022. This is totally possible. At the moment, we forecast a wide range of −1−(-4)% for 2023.


As regards the price for Otkritie, we will announce it after all the negotiations are ended. This will happen until the end of the year.

QUESTION from the LawAndFinance project:

Clients of some Russian brokers have Swiss francs frozen in brokerage accounts. They can neither use these funds, nor sell them, nor withdraw to bank accounts. Are you aware of this situation? What is the reason for it? When can this problem be solved, in your opinion?


I am aware of this problem. Indeed, the Moscow Exchange has terminated trading in Swiss francs. This is because there were difficulties with settlements caused by restrictions on the part of Switzerland. Currently, the Moscow Exchange is working with correspondent banks in order to complete settlements made in Swiss francs.


My first question is as follows. How do you estimate the shift in the probability of the three scenarios assumed by the Bank of Russia, namely the baseline one, Fast Adaptation, and Global Crisis?

And the second question, please. Does the Central Bank already have a short list of the main candidates for the status of a digital financial asset exchange operator?

And another question is about the consequences of the decision to extend subsidised lending programmes. At first, the Government approved the budget, and the Ministry of Finance reported that it did not include expenditures for subsidised mortgage lending in this budget. Consequently, it was decided that the budget would include additional expenditures. How can this impact inflation and your future decisions on the key rate?


As regards the shift in the probability of different scenarios, as far as I remember, in November, we said that the probability of the Global Crisis scenario had increased somewhat, in our opinion. In other words, the scenario has shifted in this direction. Currently, our estimate remains at approximately the same level. There has been no additional shift.

Speaking of digital financial asset exchange operators, we have already registered several of them and, as far as I know, several more are currently being studied. I do not have this information now ready at hand.

As to the impact of the extension of subsidised mortgage lending on our decisions and on inflation, additional expenses for subsidised mortgage lending as such are unlikely to seriously affect our decisions on the key rate or on inflation. This is because their amount is relatively small compared to all other budget parameters.

Nonetheless, we will make our decisions considering the overall amount of subsidised programmes, and not only subsidised mortgage lending. The reason is that any subsidised programmes, and not only subsidised mortgage lending affecting market lending, definitely impact aggregate demand. The more extensive are such programmes, the larger is their amount, and the larger are subsidies, the higher should be the market rate, all else being equal, and, accordingly, this might also entail an increase in the key rate.


I would like to explain that the main mechanism for the impact of subsidised lending programmes, including mortgage lending and others, on aggregate demand and inflation is not that the budget has additional expenditures, but that they form an additional amount of credit. Subsidised programmes are becoming an independent factor easing monetary conditions, and actually, we have to offset this effect so as to ensure that interest rates on market loans form at higher levels.

QUESTION from NTV channel:

My first question is as follows. It has already been said today several times that proinflationary risks have risen. Could you specify any particular products (if not products, then industries) where the risks are highest?

And another question, please. The New Year holidays are coming soon. A part of Russians will go abroad despite everything. The situation with Mir cards is complicated, to say the very least. They will need foreign cash. Does the Bank of Russia see any risks of a deficit of foreign currency in this connection for purchases by Russians travelling abroad?


As regards proinflationary risks, we identify factors influencing general price trends, without distinguishing any specific prices. This depends on people’s preferences, their consumer basket, and supply and demand factors in a particular market.

We can see, as I have already said, that fruit and vegetable prices first rise and then decline, and it is because there are particular factors for this (seasonal trends and others).

Speaking of settlements abroad, indeed, some countries still accept Mir cards in some of their banks, whereas others do not. We are working with these countries in order to consider all alternative payment forms. However, we do not see any surge in the demand for foreign cash or any risks of a deficit in this connection.

Besides, we have permitted banks, as you know, to sell foreign cash that they receive at their cash offices, and they do this.

QUESTION from Financial Times:

I would like to ask you about gold purchases by the Bank of Russia. I do understand that you do not disclose detailed data now, but, possibly, you could give an approximate figure of the amount of the Central Bank’s gold purchases this year. Before the pandemic, the Bank of Russia used to be a very large player. Could you at least compare the current figure with the pre-pandemic level?


I can only say that we do not disclose data on our gold transactions.

 QUESTION from the InvestFuture project:

My first question is about the exchange rate of the ruble. How steady is the devaluation of the ruble against the US dollar, the euro, and the yuan in the current situation, in the Central Bank’s opinion?

My second question is about the discussion of the so-called closed platform for disclosures for professional participants, to which management companies will have access as well, as this creates an imbalance in the market with regard to information distribution. For good reasons, many consider this initiative as the legalisation of insider trading. Could you please comment on this situation and the Bank of Russia’s opinion about this? Will there be any limits for those who will receive this information?


My opinion is that everyone should have equal access to publicly disclosed information. We support the disclosure of this information after 1 July, except a short list of sensitive data, and equal access to it.

As to the first question, I would like to ask Mr Zabotkin to answer it.


I would like to say that what is happening is, after all, fluctuations of the ruble exchange rate due to external conditions. At the moment, as far as I can judge, the ruble is still notably stronger than at the beginning of the year and over the previous year.

Therefore, the ruble will reflect changes in the quantities and value of Russian exports, as well as Russia’s opportunities for imports. Currently, the balance of trade remains quite positive.

QUESTION from Financial One:

I have two short questions. The first one is about the reserves. Is it actually possible to form them at all in the current situation? Are there any targets for this? If they are to be formed, what assets should be chosen? This is because the conditions have changed.

My second question is about the partial mobilisation. Have all the objectives been achieved already? Did you need to find out any details, to discuss them directly with representatives of the Ministry of Defence in order to address some issues within the partial mobilisation associated with this?


No, probably not, I do not remember such issues. Possibly, you mean loan repayment holidays for the mobilised persons, of course, we do communicate with the Ministry of Defence within our competence. But I do not remember any special issues.

As regards the gold and foreign currency reserves, we have sufficient gold and foreign currency reserves. There is currently no special objective to increase the gold and foreign currency reserves. As we made the decision to have two parts of the gold and foreign currency reserves (one for the case of a financial crisis, and the other for the case of a geopolitical scenario), as a result, we now have a sufficient amount of funds in both Chinese yuan and gold. We have no need to increase them.

We can decide to increase them only if funds are accumulated within the fiscal rule. When the fiscal rule starts to operate, we will have the parameters accordingly. We will then act as an agent of the Ministry of Finance and will accumulate funds for the Ministry of Finance. 

QUESTION from the Vladivostok newspaper:

Could you please explain the situation with lending? The Bank of Russia does not raise the key rate, but commercial banks have sharply increased their interest rates in recent months on almost all loans, including mortgages. Is this their response to risks or are credit and financial institutions playing by their own rules that are not connected any longer with the key rate? 


Actually, this is a very correct and important question to understand how monetary policy operates and how strongly our key instrument influences the current level of credit and deposit rates. Our key instrument is the key rate.

First of all, I would like to say that credit rates, as you have asked about credit rates, are impacted by other factors as well, not only by the key rate. The key rate is an essential factor, but there are also other factors influencing the level of credit rates as the key rate is actually a reference point for the cost of short-term money, that is, interbank and overnight loans. These interest rates are kept close to the key rate, without deviating from it significantly. In this regard, we totally control the cost of short-term money.

As to credit rates, they take into account the risks that are accepted by creditors. Their long-term interest rates take into account loan maturities, borrowers’ creditworthiness, all credit risks in general, and expected inflation.

We can see that when interest rates go up, even when we do not raise the key rate, there might be reasons behind this. Recently, we could observe that credit rates have changed, being pushed up by risk premiums. We have emphasised this factor.

Hence, monetary policy remains effective. When we make decisions on our monetary policy and the level of the key rate, we take into account changes in credit rates and how considerably risk premiums have risen or not. Depending on this, we can also calibrate our monetary policy, so to say.


I would like to add only one thing. In the press releases and press conferences following several recent meetings of the Board of Directors, including today’s one, the Board of Directors regularly stresses the factor of the impact of increased credit risk premiums on monetary conditions. This is noted as a potential disinflationary factor.

As Ms Nabiullina has already said, we take this into account when setting the key rate. To a certain extent, this can mean that this is one of the factors why the key rate is now 7.5%, that is, it is lower than at the beginning of the year. Indeed, the expansion of credit spreads causes a tightening of monetary conditions, which we partially offset by reducing our key rate.


I can say that this is not the key rate level that we assess each time, but the level of the tightness of monetary conditions, the situation in the economy, and interest rates on loans raised by borrowers. Thank you for attention.

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