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Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 9 June 2023

9 June 2023

Good afternoon,

Today, we have made the decision to keep the key rate at 7.5% per annum.

Domestic demand continues to increase, driven by both consumer activity and the public sector. Retail lending has notably expanded in recent months. Coupled with a rise in household incomes, this growth is boosting the active recovery of consumer demand. Accordingly, current price growth has been accelerating more and more owing to stable rather than one-off factors. Further on, the increase in demand will be limited by supply-side constraints, first of all staff shortages across a broad range of industries. When companies’ capacities to ramp up output are limited, higher demand will translate into a rise in prices. Proinflationary risks have grown since our April meeting, which means that a key rate increase has also become more likely. We hold open the prospect that the key rate might be raised at the next meetings. The extent of the increase will depend on incoming data on changes in prices, inflation expectations and aggregate demand, as well as on how significantly these data will affect the risks of an inflation deviation from the target of close to 4% in 2024.

I would now dwell on the reasons behind our decision.

Firstly, as regards inflation.

The dynamics of annual inflation reversed and, according to our assessments, it started to accelerate in May after the 12 months of its reduction. Comprehensive data on inflation in May are to be released tonight. Current price growth continues to speed up and is now already close to 4% in annualised terms. It is noteworthy that these are the stable components of inflation that are increasing, whereas the contribution of volatile components is declining.

The key factor is consumer demand. According to recent data, consumer activity in the second quarter exceeds our expectations. It is driven by the actual and expected rise in wages amid staff shortages in the labour market, on the one hand, and by the considerable expansion of lending, including unsecured consumer lending, on the other hand. Households’ propensity to save is going down gradually.

Inflation expectations generally stay elevated. In May, households’ expectations edged up slightly after the two months of their decline. Businesses’ price expectations have been changing diversely across industries. They remain decreased in agriculture, apparently because of the remaining large stocks of the previous year’s harvest, while trade companies, to the contrary, have been increasing their price expectations. Manufacturing, transport and storage enterprises have also raised their price expectations as their estimates of expected demand have improved.

Secondly, the economy continues to recover to its pre-crisis levels.

According to the April statistics, business activity has grown across many key industries of the economy, namely manufacturing, construction, retail, as well as services and public catering. The Business Climate Index calculated by the Bank of Russia based on the monitoring of companies stays close to its ten-year highs, although it adjusted downwards in May.

As estimated by our regional branches, domestic tourism is becoming one of the new growth drivers in the changing conditions. Many regions have recorded an expansion in machine building. Siberia has built up output of non-ferrous metals and chemicals. Central Russia and the Urals have increased output of ferrous metals. The domestic tourism and metallurgy topics are covered in the boxes of our May report Regional Economy. Some other industries also report a rebound in output to the levels of late 2021.

Overall, economic trends have been improving owing to the components of domestic demand that have fully recovered and continue to grow, substituting the share of exports in the structure of the economy. This is the key structural change. Considering the gradual substitution of external demand for domestic demand, we forecast that the economy will bounce back to its pre-crisis level next year.

We take into account the current structural changes when making our monetary policy decisions. First of all, this expansion of domestic demand amid supply-side constraints is inherently causing a rise in inflationary pressure. Secondly, this involves an additional increase in the labour market tightness. The production of export commodities is less labour-intensive and requires a lower number of workers than that needed to manufacture goods and services for growing domestic consumption. Import substitution involves the establishment of new enterprises inside the country, which requires a large number of workers.

According to our monitoring of businesses, pressure in the labour market has been growing. In May, companies’ estimates of the sufficiency of workforce continued to worsen. The staff deficit is most acute in machine building, metallurgy, and mining and quarrying. Such a situation in the labour market is a considerable constraint for a further expansion of output. Moreover, increasingly more companies are reporting problems with imports due to secondary sanctions.

Thirdly, monetary conditions have eased, although remaining neutral overall.

The yield curve of federal government bonds has changed only slightly from the April meeting of the Board of Directors.

The expansion of lending, especially in the retail segment, continues to speed up, supported by non-price lending conditions that have eased somewhat. Banks expect an increase in companies’ revenues and households’ incomes and, therefore, are ready to issue loans to a wider range of borrowers and in larger amounts. To prevent an accumulation of the risks of lending to over-indebted borrowers, from 1 July, we will reduce the maximum allowable proportion of such loans in overall lending for banks and microfinance organisations.

The trends forming in the retail lending market might suggest a gradual shift towards an increase in the propensity to consume, as a result of which the saving ratio is going down from its elevated levels.

Yields on corporate bonds have edged down slightly as well. The value of initial offerings was high in April—May this year.

Now, I would like to speak of external conditions.

The global banking sector has apparently managed to overcome the acute stage of the crisis. However, risks for the world economy remain. After the active post-coronavirus recovery in the first quarter, the Chinese economy has slowed down. The growth rates in major economies are expected to be more moderate in the future. This is affecting prices for commodities, a large exporter of which is our country. Recently, we have been observing a reduction in global prices for gas, coal, metals, and fertilisers.

In addition, the world economy is returning to its pre-pandemic structure. During the pandemic, the demand for services plummeted, while the demand for goods was up. Now, the situation has reversed. High-frequency indicators show a steady increase in economic activity worldwide, driven by services, whereas the expansion in the industrial sector is slower.

For Russia, all these trends will involve a further contraction in the surplus of the balance of trade. All else being equal, this reduction might have a proinflationary effect through the exchange rate. Moreover, the geopolitical tensions also have a strong negative impact. Trade partners are becoming more concerned about the secondary sanctions, which might make settlements even more complicated and additionally increase delivery periods.

I will now speak of the risks that might cause a deviation of inflation from the baseline forecast.

According to our estimate, the balance of risks has shifted towards proinflationary ones even more. Staff shortages might become the key supply-side constraint, due to which the capacities to ramp up output might be insufficient to meet expanding demand. This might accelerate price growth above the inflation target of close to 4%.

Besides, the risks of a further tightening of the sanctions, especially secondary ones, are growing. There are still risks of a slowdown in the world economy.

As to disinflationary risks, it is possible to speak of households’ high propensity to save and the effect of the previous year’s record harvest.

We will continue to closely monitor the progress of the implementation of fiscal policy. Since fiscal and monetary policies both impact aggregate demand, they cannot be accommodative simultaneously after inflation returns to its target rate. When the fiscal stimulus increases, the central bank needs to symmetrically reduce the impulse through the credit channel in order to maintain price stability. This might require an additional rise in the key rate.

Winding up, I would like to comment on monetary policy prospects.

We reaffirm our determination to bring inflation back to the target next year and maintain it at the target level further on. Considering the intensifying inflationary pressure, we admit the possibility that we might need to raise the key rate already at the next meetings in order to limit inflation. The percentage of a key rate increase will depend on how significantly incoming data will affect our estimate of the balance of risks to the achievement of the 4% target in 2024.

Thank you for attention.

Q&A for the Media

QUESTION from Interfax:

In the press release, you mention the risks of growth in consumer demand that might exceed the potential to ramp up output.

Are we to understand that you are warning of the risk that the Russian economy might face an overheating? How material is this risk and how significantly might it affect inflation, in your opinion? Do you think that an expansion of imports could eliminate this imbalance? What other trends could mitigate this risk?

And question two, please. In April, you spoke about difficulties with repatriating export revenues in national currencies, namely in rupees. The Central Bank receives information from exporters.

How serious is this problem with rupees and, generally, any national currencies now for exporters?


As regards the risks of overheating, overheating is a situation where GDP is above the potential, when demand is growing faster than supply and GDP has already reached its potential. An indicator of such overheating is inflation when it exceeds the target.

Currently, we cannot say that there is overheating in the economy, but there are such risks and we should address them. This is why we are talking of proinflationary risks and factors.

Speaking of an expansion of imports, the part of increasing domestic demand that is not covered by domestic supply can be covered by imports. This provides certain flexibility. However, for imports to cover this gap, there should be an adequate increase in exports. Therefore, we need to track the dynamics of the balance of trade.


I would like to add that where imports go up and exports cannot expand, the exchange rate will be weakening and, accordingly, inflation will be accelerating because of this weakening of the exchange rate.

In contrast, when there is, so to say, a balanced increase in exports and imports, the exchange rate channel will not create inflationary pressure and the market will preserve its equilibrium. Nevertheless, to produce exports, the economy also needs internal resources, namely workforce, production capacities, and so on. In other words, to expand exports, the economy will still be increasing above its potential and affecting inflation through this channel.

Therefore, in this case, imports cannot eliminate the problem of overheating — it can be settled only when the economy returns to a steady and balanced growth path.


Two other essential conditions are an increase in the economy’s potential and its potential growth rates.

Speaking of settlements in national currencies and their impact on markets, we are really switching to settlements in national currencies, including rubles, for the most part. April statistics show that the proportion of exports paid for in rubles has reached 41% already.

Revenues in other currencies are credited not as smoothly as before because there are problems with settlements and so on. However, we can see that the amounts of foreign currency revenues sold by exporters remain high.

According to data for January—April, the largest exporters are selling nearly 78% of their foreign currency revenues, which is quite a high percentage.

Of course, there are problems with crediting funds and settlements in other countries’ national currencies. This depends on several factors, including two key ones. The first factor is possible imbalances in trade. When there is no imbalance, and exports and imports are both transitioning to a particular national currency uniformly, such problems do not arise. If there is an imbalance — and, unfortunately, we do have such imbalances with many countries — we have to address the issue of accumulation of funds in a given national currency and their usage, that is, to decide whether to convert these funds into other currencies or to invest them in certain assets.

There is also another question in this regard: how freely can another country’s national currency be converted into other currencies? Many countries have no restrictions in this area, and the purchase or ownership of assets in these national currencies depend on the readiness of particular companies, although not all of them wish to buy or hold them.

Hence, we are exploring multiple options. Russian exporters and other companies are also exploring various options, for instance, making settlements in third countries’ currencies that are demanded.

Speaking of settlements in rupees, indeed, there is such a problem, but I would not say that it is widespread or becoming more serious. We do observe this problem, but there are currently no signs of its further exacerbation.

QUESTION from TASS Agency:

I’ve got a traditional question. Did the Bank of Russia Board of Directors consider a possible increase in the key rate today? Did you discuss a change in the neutral range of the key rate?


Yes, we did discuss particular percentages of a key rate increase, but we came to the consensus to keep the key rate unchanged and tighten the signal. A key rate increase has become more probable.

As to a change in the neutral rate, we have already said this and now reiterate that we will revise our estimate of the neutral rate range, but this revision will be in the Monetary Policy Guidelines. This will be in summer—autumn and, most likely, our estimate of the neutral rate range will be adjusted upwards.

QUESTION from the Yoshkar-Ola Weekly:

Inflation is expected to return to its target in 2024. Does this mean that, in 2024, the Bank of Russia will restart estimating the possibility of decreasing the inflation target?

How do you estimate the potential for reducing the inflation target that formed as of the end of 2021 according to the data on the Russian economy? To what extent has this potential been utilised? Isn’t the Bank of Russia planning to return to this question as early as 2023? If no, would this imply that the Bank of Russia does not expect the country’s economy to recover to its 2021 level this year?


I would rather start out with the last part of your question. We expect that the Russian economy will bounce back to its 2021 level next year. However, the question about whether or not the inflation target should be changed does not depend on the time when the economy will recover to the level before its downturn.

We are discussing whether it would be reasonable to decrease the inflation target within our Monetary Policy Review project that is currently underway. This discussion is still in progress.

I would like to note that our specialists’ studies show that, technically, a lower inflation target might have a positive effect on social welfare. Nevertheless, we believe that it is necessary to take into account the current structural changes in the economy when assessing the reasonableness and possible time of a decrease in the inflation target. Anyway, we consider that the inflation target can be lowered only after we stabilise inflation at its current target of close to 4%. The decisions we are making rely on the effective target of close to 4%.

QUESTION from Kommersant:

As long as the communications of the Board of Directors’ recent rounds have been repeating the wording ‘savings are at an elevated level’, obviously, there can also be a decreased level. I would like to ask you to describe, if it is possible, the neutral level, relative to which you measure these savings, and the factors influencing this level.

At the previous press conference, you already described one of the indicators, that is, the amount of funds in demand accounts characterising the level of liquidity. What other indicators do you track to measure the propensity to save and the change in this level?


This is really a very good question. We have considered it as well when discussing a decrease in the saving ratio from its elevated level and a possible level of the saving ratio. In our opinion, it might be even higher today than ever before 2022 because households might prefer to have larger safety cushions considering an increase in overall uncertainty. Therefore, we are monitoring these indicators.

Indeed, there are various indicators, and not only a liquid and a non-liquid part of savings, but also the saving ratio in general. We are measuring these indicators.

Would you like to add anything, Mr Zabotkin?


This is definitely a very important issue. Given that the saving ratio was also fluctuating quite strongly in 2020–2021 due to the pandemic, 2018–2019 can be apparently considered to be a historical reference period as inflation then was about 4% and our policy was close to neutral.

As to the indicators, both of them are essential. The first one shows the percentage of current income that is saved. Of course, it is not enough to monitor only deposits because people make savings in the form of bank deposits, securities and investment in real estate. The indicator should be comprehensive and adjusted for retail loans, that is, we should analyse the net saving ratio. This is the main indicator that we track.

However, to assess the current level of savings in general, we also measure the savings-to-income ratio, which is another important indicator. In the second half of last year, it somewhat decreased due to higher inflation that absorbs savings and the freezing of a part of securities, investments in securities.

According to our assessments, as the saving ratio stayed elevated during the previous three to four quarters, the savings-to-income ratio has now approached the level recorded as of the beginning of last year. In other words, the process of the restoration of savings has completed and this will apparently contribute to a decrease in the saving ratio.

QUESTION from Delovoy Petersburg:

Recently, the proportion of the so-called protection bonds, namely floaters and linkers, has increased in the debt market. The percentage of corporate loans at floating interest rates has been rising as well.

Are we to understand that this circumstance is making the corporate sector, the financial market more responsive to a change in the key rate? How does the Bank of Russia take this into account in its monetary policy decisions?


Indeed, a wider use of credit instruments at floating interest rates in the corporate sector involves a faster pass-through of key rate changes to the cost of credit for businesses in the first place, that is, an acceleration of the effect of the transmission mechanism.

All else being equal, this implies that, if the proportion of corporate loans at floating interest rates increases, the Bank of Russia might be able to return inflation to the target faster when the key rate deviates from its neutral level, that is, this period might be shorter.

Nonetheless, we believe that these are second-order effects. There are more important effects, and these are fluctuations of aggregate demand. This is the ratio of current GDP to potential GDP. Anyway, these effects may certainly exist.

However, I would like to note that a wider use of corporate loans at floating interest rates also has another side. This process means that businesses accept higher interest rate risk, which might decrease the predictability of cash flows for companies. They should therefore make their own comprehensive analysis of whether a floating interest rate is acceptable for them and how they manage their financial risk.

QUESTION from RIA Novosti:

You have already mentioned several times today that the Central Bank will most likely raise the key rate at its next meetings. How likely is its increase already in July? Does the Bank of Russia expect annual deflation in summer 2023? Do you think that annual inflation will reach its highest level exceeding the target of 4% this year or in 2024? If this is expected in 2023, then in what quarter or month might it happen?


Speaking of a likely increase in the key rate, we have signalled that we do admit the possibility of raising the key rate at our next meetings, including in July, but the final decision will depend on incoming data.

As regards the second question about deflation this year, I can say that we do not expect annual deflation.


The probability of annual deflation this year is equal to zero because, as we have already said and as you can see from statistics, annual inflation started to accelerate already in May. According to weekly data, the recent rate is 2.6% year-on-year. As the very low negative rates of last summer are excluded from the calculation of annual inflation, its rate will significantly rise during summer and autumn.

Hence, it would be totally wrong to speak of any negative rates of annual inflation.


As regards a local high of annual inflation, we expect that this might happen approximately at the end of this year or the first half of the next year, but it is impossible to say when exactly.


As has been reported today, the Association of Russian Banks sent a proposal to the Central Bank for granting loan repayment holidays to the victims of terrorist attacks, armed hostilities, sabotage, and other similar circumstances. What is the opinion of the Bank of Russia regarding this initiative? As we know, the Central Bank gave some recommendations in a letter sent to banks. What are these recommendations about?

My second question is also related to news. It has been reported that a bank introduced a rather high fee for crediting US dollars — up to 50% of the amount to be credited. What is the Bank of Russia’s position regarding this? Do you think that we need a regulation when banks introduce rather high fees?

I’ve got also a clarifying question, if I may. You have said that the percentage of exports paid for in rubles reaches 41% today. Could you please specify what is the share of imports paid for in rubles and friendly states’ national currencies?


Answering your first question about loan repayment holidays, generally, our policy supports such holidays. As you know, we have proposed that people should have the opportunity to receive repayment holidays once for a loan in certain life circumstances, regardless of the situation.

We are aware that the borrowers forced to move from the border regions have lost their income due to this. In our opinion, they may apply to their creditors, including both banks and microfinance organisations, for changes in loan or microloan agreements, and the creditors should now consider such applications on an individual basis. We have sent such recommendations. Besides, I would like to say that if a bank refuses to consider such applications, borrowers can then apply to the Central Bank. We will monitor the situation and analyse the requests we receive.

It is worth noting that we previously forwarded similar recommendations to banks regarding loan restructuring for borrowers affected by emergencies. Hence, we have a mature mechanism of communication with banks, and generally, banks have been addressing such situations rather efficiently.

As regards the fees that banks charge on foreign currency transfers, they have the right to do so, and we have also spoken about this many times. Such fees are associated with the fact that banks comprehend the risks of dealing with foreign currency liquidity. Some of them even impose restrictions.

Therefore, to reduce such risks and avoid freezing of people’s foreign currency funds in the worst-case scenario, banks introduce such fees.

As to the proportion of payments for imports in rubles, indeed, this process is developing. I do not have precise data now ready at hand on the current percentage of such settlements. The share of payments for imports made in rubles and national currencies is certainly growing as well. However, as far as I remember, this process is slightly slower than in exports.

QUESTION from the project Slozhny Protsent:

I have two questions. The first one is about the implementation of the fiscal rule, and the second question is related to the difference between expected and observed inflation.

When will the Ministry of Finance shift from selling yuan and gold from the National Wealth Fund (NWF) to their purchases, in your opinion? Might the current ruble weakening and the subsequent increase in budget expenditures accelerate this process? When the Ministry of Finance resumes foreign currency purchases, what additional effect might this have on inflation and the ruble exchange rate?

And question two, please. As we can see from the statistics on expected and observed inflation over the past ten years, observed inflation was almost always higher than expected inflation. In other words, people are actually always expecting prices to grow a little more slowly in a year and then, every year, they have to recognise that their expectations failed. Do the Central Bank’s forecasts take into account the fact that, actually, people are persistently underestimating future inflation? Do you factor in such a tendency in your key rate decisions?


I would start out with the second question about expected and observed inflation. Indeed, observed inflation currently exceeds the expected rate, and this gap between the two rates is wider than it used to be in 2018 and 2019. This is a frequent trend after a period of a rapid acceleration of price growth. People tend to remember such a surge in inflation for a long time — even after quite a long period, a year after. Expected inflation is to a greater extent associated with confidence in monetary policy, among other things.

Of course, we analyse both expected and observed inflation, but expected inflation is a more important indicator for us when we make monetary policy decisions. This is why we are talking of inflation expectations as they influence people’s choice regarding savings, consumption and so on.

By the way, I would not say that people always underestimate future inflation. It is often the other way around: they expect higher inflation, whereas it can actually be lower, and we did observe such cases.

Speaking of yuan sales and purchases by the Ministry of Finance, we do not expect that it will shift to purchasing yuan, judging by the data for this year. In certain months, its operations might depend on the revenues received and prices, but, generally, we do not assume such a shift this year.


As can be seen from our April macroeconomic forecast, Russia’s foreign currency reserves during the year in general have been decreasing exactly by the amount to be sold within fiscal rule-based operations.

What are the other aspects to be emphasised in this regard? Indeed, it is widely believed that the type of fiscal-rule based operations conducted by the Ministry of Finance can somehow affect the dynamics of the exchange rate. This is a wrong view as the aim of the fiscal rule is to stabilise expenditures, but it also has a side effect as fiscal rule-based operations by the Ministry of Finance accurately offset the fluctuations of oil and gas revenues and, accordingly, when the market receives smaller amounts of foreign currency revenues due to low oil prices, the Ministry offsets this decline selling foreign currency from the NWF.

Contrastingly, when the market receives larger amounts of foreign currency revenues, the Ministry partly absorbs this surplus by replenishing the NWF. Thus, with regard to the context of the question and the impact on the FX market, the type of fiscal rule-based operations by the Ministry of Finance actually has no effect on the dynamics of the exchange rate as these operations offset the impact of external factors.

QUESTION from Argumenty i Fakty:

People in the border regions are now facing higher risks to their lives, health and property. In this connection, I would like to ask you whether the Bank of Russia is discussing changes to insurance terms with commercial banks and insurers so as to enable residents of the Kursk and Belgorod Regions to insure their lives, health and property and receive payments under the earlier purchased insurance policies.

My second question is about food inflation. Currently, it is low in Russia and extremely high in Eastern Europe. Are there any risks that this high food inflation in Europe might speed up inflation in the Russian market?


This is definitely essential to enable people living in the border regions to insure their lives, health and property. This is a critical task. Considering that market participants are now reassessing these insurance risks, we are holding a discussion with them about what should be done to provide these basic financial services to people. We will be taking appropriate measures where needed. If such market insurance turns out to be rather expensive (premiums should be correlated with risks), this will require state support measures, and we will discuss them with the Government.

Speaking of food inflation, it is really lower in Russia, which is predominantly associated with the base effect. After inflation sped up in spring 2022, food prices then adjusted downwards. This was owing to subdued consumer demand, a good harvest of many crops, and the pass-through of a quite strong exchange rate of the ruble. All these factors moderated the growth of food prices.

However, it is worth noting that food prices are very volatile and depend on the levels over the past 12 months you are analysing — they might be notably fluctuating during a year.

Hence, we can see that these base effects might now cause a slight increase in inflation. Nevertheless, we are rather focusing on overall inflation that should stay around 4%. This will generally mean more moderate food price growth.


Generally, we mention in the press release that the remaining stocks of last year’s harvest, specifically of grains, and quite good forecasts for this year — that are really still very good compared to annual averages — are rather creating disinflationary factors until the end of this year exactly with regard to food inflation.

However, as Ms Nabiullina has already said, we are focusing on overall inflation, the growth rate of the overall price level. Therefore, our monetary policy is aimed exactly at returning the overall price growth rate to 4% and stabilising it at this level.

QUESTION from the Vladivostok newspaper:

Recently, the Central Bank has been criticised for its actions, primarily its key rate decisions, that are restraining the development of the economy. How justified are such views? Do you think that the Central Bank could consider using other tools as well in the current conditions, in addition to the key rate?


No, we are not restraining economic growth — quite the opposite, we are contributing to steady and balanced economic growth as price stability is crucial to ensure robust economic growth. A short boom might be followed by a deep decline that, by the way, might be often accompanied by a financial crisis. Therefore, price stability is critical for long-term balanced economic growth.

The overall goal of inflation targeting, countercyclical macroeconomic policy is to prevent such fluctuations from overheating to overcooling.

Besides, the experience of 2022 shows that our monetary policy regime, inflation targeting can mitigate the consequences of not only such cyclical fluctuations, but also severe structural shocks.

You are talking of other tools, but other tools supporting the economy are primarily utilised by the Government — these are the structural changes.

If you imply subsidised lending to certain industries or a large number of industries through the Central Bank, we believe that this would rather damage the economy. This is because, in this case, lending conditions would worsen for all other industries that would not have access to subsidised loans. In other words, this would be quite similar to a situation when individual industries are supported at the expense of others. After all, monetary policy methods and tools are targeted at the economy in general.

In addition to monetary policy tools, the Bank of Russia as the mega-regulator certainly has other instruments used to support economic growth, that is, the development of the financial market as a whole and the securities market.

As you know, not so long ago, we made the decision on a risk-sensitive approach in banking regulation so as to encourage banks to issue loans for structural transformation projects in various industries, but the list of such eligible industries is still approved by the Government. The Central Bank should not implement structural policy and select industries and companies to be or not to be supported.

QUESTION from TV channel Russia 24:

Artificial intelligence technologies, such as Chat GPT and others, are becoming increasingly more popular today, but many are warning of the threats they might involve.

How does the Central Bank assess the risks that might be caused by a possible adoption of such technologies in the financial sector and exchange trading, in particular?


Any technologies and not only artificial intelligence apparently create new opportunities, but they also involve new risks, and it is critical to be aware of such risks. When a new technology is invented, the related risks are assessed. Of course, there is still not enough information about potential consequences.

Speaking of artificial intelligence, we believe that it creates great opportunities in the financial market and not only in exchange trading. Many Russian banks are applying or testing artificial intelligence in assessments, credit scoring, anti-fraud measures, and other areas.

Hence, these technologies are really promising, but we should be aware of, track and mitigate these risks to make sure that these innovations only benefit the market.

QUESTION from Bloomberg:

My colleagues have asked you about rupees. Could you please specify the amount of rupees that has been accumulated and cannot be converted? Possibly, it is difficult to give a precise figure. However, to understand the scale of the problem, could you, please, say whether this is about millions, billions or dozens of billions of US dollars? This is my first question.

My second question is as follows. Mass media are reporting that the Bank of Russia has significantly improved the quality of interaction with the Government over the past year, and now you are relying on and developing your plans being guided by a certain Chinese scheme, aiming to ensure a steady rise in GDP while maintaining financial stability, as far as I understand, and not to achieve the inflation target. In other words, you take into account inflation as well, but the primary indicators are an increase in GDP combined with stability. Is this true? Have we missed anything over this year?


As to the accumulated revenues in rupees, I would not give any figures, but I would like to say that the amount is really minor in terms of its percentage in overall foreign currency revenues.

Speaking of our interaction with the Government, there have been no changes in its format with regard to macroeconomic policy and we do not plan any changes. When I was talking of better coordination with the Government, I meant temporary anti-crisis measures, in the first place, that is, the regulatory easing for the financial sector, the support for borrowers, and the capital controls. Of course, we discussed all these measures in detail with the Government.

I can say that the interaction with regard to macroeconomic policy has also become closer. This is essential in the conditions of high uncertainty when the situation is rapidly changing. We coordinate our positions more frequently to compare our assessments of the situation, views about further challenges, and opinions about the future. Nevertheless, as before, the Bank of Russia makes its monetary policy decisions absolutely independently.

As regards the goal of supporting economic growth, the Russian laws establish that monetary policy is aimed at maintaining price stability, including to promote steady and balanced economic growth, as long as price stability is a factor of economic growth, and we are perfectly aware of this.

We believe that the independence of the Central Bank is definitely a critical prerequisite, a critical factor influencing macroeconomic stability and, ultimately, steady long-term growth and people’s welfare.

QUESTION from TV channel NTV:

Not so long ago, Russia’s Ministry of Industry and Trade announced its plans to reduce parallel imports as companies started manufacturing domestic alternatives. Previously, the Central Bank noted that parallel imports contributed to a decrease in prices.

Does the Bank of Russia see any risk of an acceleration of inflation in the case of reducing parallel imports?

My second question is about the digital ruble. Today, we already have multiple options such as cashless payments, cards, the Faster Payments System, Mir Pay, payment stickers, and others. Why should the digital ruble become interesting to Russians for them to begin using it? Have I got it right that is is primarily needed for cross-border payments?


As regards parallel imports and import substitution, we need a certain balance in this area, in my opinion. The Government will find this balance in order to ensure the affordability of goods that were previously imported if they are manufactured inside the country.

In terms of the impact on monetary policy, import substitution will require additional labour resources, as we said earlier. However, if we import goods, these imports should be paid for from export revenues. Exports also require labour resources, although Russia’s traditional exports are less labour-intensive. All else being equal, a reduction in parallel imports and import substitution might probably intensify the tension in the labour market to a certain extent. We will take this into account if this becomes a large-scale problem and monitor the situation.


I would like to add only that, if possible new restrictions on imports, or the decisions that you have mentioned, or a tightening of secondary sanctions make it impossible for domestic enterprises to manufacture goods at comparable prices (prices that are now offered for imported goods), this will certainly entail price growth for consumers.


As regards the second question about the digital ruble, this is true, as we are always saying, the Russian financial sector is very advanced in terms of services, innovations, and the convenience of servicing. We have got multiple options and, because of this, will see a less significant increase in the quality, compared to the countries that do not have such services when they start issuing digital currencies. Nonetheless, we believe that the quality will definitely improve.

There are several reasons for this. First of all, this will decrease the dependence on a particular bank, including in terms of money transfers, and the dependence on banks’ fee policies.

Secondly, as we have also mentioned already, the indicator of success of the digital ruble for us is not the scale of its use, but rather the fact that banks will start paying more and increase interest on people’s funds in their current accounts. Therefore, the digital ruble will make these transactions much cheaper and, in certain amounts, even fee-free. In other words, transaction costs will decrease, and this will benefit clients and consumers to a greater extent.

The third reason is certainly potential development in cross-border settlements, which is crucial.

QUESTION from the project InvestFuture:

My first question is as follows. There is quite a serious problem with bonds of the Republic of Belarus: the redemption was in February, but people have not yet received the money and actually do not understand how this situation is developing. Is there any progress in this regard? Has any mechanism been developed? This is the first question.

My second question is about the situation with individual investment accounts (IIAs). The matter is that some people have now decided to close their IIAs for certain reasons, but they are unable to do so because, let’s assume, one share of the Petropavlovsk company has got stuck in their IIAs. In other words, this is just a technical issue. People cannot close their IIAs with at least one large broker. This is also arousing quite strong indignation and distrust. While there are plans to promote the third type of IIAs, people are facing such problems with the earlier account types.

Do you have any information about this situation and is it possible to influence it in any way? This would be great.

My third question is about lending. Today, many banks are offering rather actively cash loans at extremely low interest rates of 3–4%. This seems quite attractive, but the problem is that these terms are generally effective only during the first month, after which the interest rate increases. What is the regulator’s opinion about this issue? Are you going to regulate these marketing campaigns somehow?


Speaking of Belarusian Eurobonds, the Bank of Russia is aware of this situation.

I would like to emphasise that Eurobonds of the Republic of Belarus are foreign securities and the related liabilities are to be fulfilled according to foreign law. In other words, we cannot regulate or control this directly. We know that Belarus is currently working on changes to its national laws in order to develop a mechanism for transferring the payments on Eurobonds of the Republic of Belarus to their holders whose rights are recorded by Russian depositories. In turn, we are carrying out consultations with the Ministry of Finance of the Republic of Belarus in order to ensure that the Russian depositories’ clients receive due payments.

As regards the impossibility to close IIAs because there are certain shares in them, we also know about this problem. This is actually a technical issue, and I would like to stress that it has nothing to do with the functioning of the IIA system as a whole.

This problem has been eliminated by now, and the clients can apply to their broker to conduct transactions on these IIAs.

As to cash loans when banks attract clients by offering low interest rates and then raise them, we are really concerned about this problem because low interest rates during the first period are advertised in big letters that are easy to grasp, whereas the subsequent increase in these rates — in very small letters that people do not even see. This is a matter of concern for us, just as for the Federal Antimonopoly Service. We have recommended banks to disclose the information about interest rate changes on their websites and to make these terms as easy to see as low interest rates. We are monitoring how banks are promoting these loans. Besides, we know that the Federal Antimonopoly Service is ready to implement supervisory measures, as this is within its competence, when such violations are revealed.

Furthermore, we expect a positive effect if the legislative authorities adopt the law (which is currently under consideration) about the total cost of credit regulating not only what should be included in the total cost of credit, but also setting the requirement for disclosing information in an easy-to-understand form with honest, clear and precise figures.


All this is relevant with regard to not only consumer cash loans, but also mortgages and car loans, because, in all these cases, creditors might use unfair practices offering reduced interest rates at the initial stage, while people are unable to estimate the total amount of their future debt burden.

QUESTION from the project PRO.FINANSY:

My first question is about fraudsters who anonymously offer in social networks that people make investment, send their bank card details to them, and trustful people transfer their funds to these cards. The Central Bank is taking a lot of efforts in this area actively posting social adds about this, providing a lot of relevant information on the internet, developing the Financial Culture project, and so on.

But the matter is that the funds are transferred to Russian bank cards and, as far as I know, there was a mechanism, or it is being developed, or maybe it is already functioning, that allows people to apply to a bank and somehow suspend such a transfer and get a refund afterwards. Is this mechanism now working? This is important because people might realise that they have done a stupid thing just in about ten minutes after the transfer, but can do nothing with this. This is my first question. In this regard, it is also possible to say that the law enforcement agencies seem to lack sufficient skills to work with people on these issues. Is it generally reasonable to complain to the law enforcement agencies about such problems and are they able to investigate such cases?

My second question is as follows. Is there any information about the exchange-traded and open-end unit investment funds that were blocked? It has been quite a long time since the moment of the blocking, and people are very much concerned about the situation wishing to know whether anything is being done or not.


As regards fraudsters, this is really a very good question. Regretfully, cyber fraudsters remain very active. We are really taking measures, and banks are taking measures developing advanced anti-fraud systems quite quickly, but the losses are still rather high. Although the percentage of successful cyber attacks and transactions is shrinking, this is still a matter of concern for us and we are monitoring this issue. You are totally right saying that social engineering techniques are widespread.

One of the ways to deal with this is a draft law — and I have also spoken of it already as we are expecting that it will be adopted faster — to oblige banks to reimburse customers for the entire amount of transactions if a bank processes them and transfers the money, even where this is done at the customer’s order, to a fraudulent account if the latter is on the Bank of Russia’s database. Trust me, there are such cases, and we are keeping such a database. Of course, this will not eliminate the problem, but where the money is transferred to the accounts put on this database which we provide to banks, they will be obliged to reimburse their customers for such money transfers.

Moreover, we are planning to introduce a two-day cooling-off period for this purpose when a bank is allowed not to transfer funds if transactions cause any suspicions or have signs of fraud, and a customer will have time to think better and cancel such a transaction.

Nevertheless, financial literacy is certainly essential. We may not slow down and need to continue our efforts aimed at raising people’s awareness that they should not disclose their banking details to anybody, no matter how they present themselves. There is a channel for prompt communication when people can apply to a bank by calling a specific phone number. Never disclose these data to anybody, no matter how they present themselves — law enforcement agencies, the Central Bank, and so on.

We are cooperating with the law enforcement agencies rather closely and discussing all the measures. Of course, it is necessary to apply to the law enforcement agencies in such cases.

As regards the blocked assets, we continue the work in this area exploring various options, but it is actually difficult to address these issues without foreign regulators’ decisions, and we have no information about such decisions.

QUESTION from TV channel OBL1 (Orel):

The Bank of Russia is holding public consultations on its Monetary Policy Review. Did the information reported by the regions influence the key rate decision made today? Did you take into account any initial results of the consultations when making your decision?


No, this information did not influence our today’s decision directly. This is because the Monetary Policy Review is quite a large-scale project of the Bank of Russia involving a comprehensive analysis of monetary policy over the entire period of inflation targeting, that is over nearly eight years.

We are exploring and discussing the effects of this policy, future challenges and adjustments to monetary policy that would make it as efficient as possible. This project is not about current decisions.

Nevertheless, the consultations as such and the discussion of the Monetary Policy Review in the regions with the participation of experts and businesses provide additional information to the Bank of Russia regarding the current situation. Mr Zabotkin personally participates in such consultations, by the way. Our colleagues from the Monetary Policy Department use this information in addition to the data reported by our regional branches to better comprehend the developments in the regions.

Besides, the situation in the labour market is discussed quite frequently during such consultations, as far as I know.


This review is the first one, and the cycle of the meetings is actually very insightful. We have already held such meetings during the previous two weeks at four main branches. The other three meetings will take place in the second half of June. As regards the current situation, the common topics that arouse businesses’ anxiety are difficulties with finding and even retaining specialists in various industries.

Speaking of the feedback on the Monetary Policy Review itself, our opinion about the inflation target and, generally, their correlation with the views presented in the consultation paper, indeed, the absolute majority of the participants in the discussion say that the target of close to 4% is relevant, there is room for discussing its possible reduction in the future and this discussion should be continued.

QUESTION from Reuters:

My question is about decisions on a key rate increase as you have said that you were discussing them today. Did you consider any particular percentages of an increase and what are they? If the key rate is raised, will the economy be able to reach its pre-crisis growth rate in 2024?

My last question is about the budget. Previously, the Central Bank was repeating that it expected the Ministry of Finance to reach the targets. Is this true today? What are your expectations? Should we expect the Ministry to revise the budget and spending targets upwards in autumn?


This is true, we did discuss particular percentages of a key rate increase. The suggestions varied from 0.25 to 0.75 of a percentage point.

As to a key rate increase and the rebound to the pre-crisis level, I would like to ask Mr Zabotkin to comment on this.


In this regard, I can only refer to the forecast following our meeting in April. As you know, our April’s forecast of the key rate range admitted the possibility of a quite significant increase in the key rate over the remainder of the year. However, the GDP growth range assumed in this forecast is positive, and even the lower bound of this forecast implies that, in 2024, the economy will fully recover to its 2021 level.

Therefore, to answer briefly, an increase in the key rate will help return demand to the level correlating with the economy’s potential, while the economy will reach its 2021 level in 2024. This is a part of our April’s baseline scenario.


Speaking of the budget, our baseline scenario almost always relies on the fiscal policy parameters announced by the Government. However, as you can see, we observe the risks of an inflation deviation from the baseline scenario if the Government revises its fiscal policy. If it becomes more expansionary than has been announced by the moment, this might require an additional increase in the key rate, on top of what Mr Zabotkin has just mentioned.


Returning to the first part of the question, this will not change the forecast of economic growth as the public sector will create additional demand. Accordingly, demand from the private sector in such conditions should be slightly lower.

QUESTION from the project LawAndFinance:

The Central Bank mentioned several times that a larger number of retail investors in the stock market is currently a priority task. What can you say about the idea of establishing an insurance system that would protect investors against brokers’ bankruptcy? Are there such plans? If yes, when might such a system be created?

And question two, please. People are complaining about high prices for new housing provoked by subsidised lending to support developers. What is the Bank of Russia’s opinion concerning this situation and what is it going to do to improve the affordability of housing for people? What is the Bank of Russia’s position about the launch of subsidised lending for existing housing?


Speaking of the system of insurance of long-term savings, we are currently discussing this topic with the Ministry of Finance. We believe that this should be not a government system, but a market-based one and insurance should be provided by market participants.

Of course, we need to decide what should be considered an insured event — withdrawal of a broker’s licence regardless of the reasons or only in certain circumstances. This issue is currently under discussion.

As to subsidised lending and the affordability of housing, you know our opinion. We believe that extensive programmes of subsidised mortgage lending are a very efficient mechanism in crisis conditions, but it should be temporary — otherwise, its effects, first of all on housing prices and, accordingly, the affordability of housing, might later on become negative.

Last year, we could observe that the extensive implementation of subsidised programmes from developers provoked an increase in housing prices and a gap between prices for new and existing housing that exceeded 30%.

Therefore, we have taken measures to considerably increase loss provisions for such loans. In our opinion, after such an extensive programme of subsidised lending is completed, it is certainly necessary to make it targeted so as to really improve the affordability of housing. It is essential to more actively develop targeted programmes. We already have the Family Mortgage and Far Eastern Mortgage programmes, and they should be developed.

If such programmes are made targeted, subsidised lending for existing housing might be efficient, in our opinion. We believe that these should be targeted social support programmes, regardless of whether a person purchases new or existing housing. If these programmes are aimed at supporting not the construction industry but households to help them purchase housing, we consider that these programmes can certainly encompass existing housing as well.

QUESTION from Izvestia:

I’ve got one topic, but several questions concerning it. As you have mentioned, the macroprudential limits will change from 1 July (the Bank of Russia Board of Directors made the relevant decision on 22 May). The comments to the decision say that banks and microfinance organisations generally comply with the effective limits. Creditors do not violate the limits, including banks through an increase in new short-term loans issued for less than five years, for instance, for three years. In this connection, I have several questions.

Don’t you expect that overdue payments might increase? Apart from new loans, there are bad borrowers, to put it bluntly, who now cannot restructure their loans by extending their maturities and, accordingly, reducing the payments. In other words, might this cause an increase in overdue payments? Why have you made this decision despite the fact that creditors comply with the current limits? Is there a possibility that the Bank of Russia reduces the limits once or several times until the end of the year?


These limits are aimed at decreasing high-risk lending. The fact that banks and microfinance organisations complied with the earlier limits does not mean that we are satisfied with the resulting percentage of these risky loans. We believe that this proportion should be reduced further and, therefore, we are tightening these limits, while giving time to banks for them to adjust their business models and so on. They were able to comply with the previous limits, and now they should adhere to the new ones. We will monitor the situation, particularly any attempts to circumvent these limits through maturities, and will take appropriate measures, where needed, including until the end of the year. We will track the dynamics of lending.

As I have already said, unsecured lending is surging, but it is essential to ensure that this is not an increase in high-risk loans.

Currently, the statistics might not show a rise in overdue payments as the amount of lending is generally growing. However, to avoid such a large-scale increase in overdue payments in the future, which might involve problems for both borrowers and banks, we are using these macroprudential limits. We will monitor the situation and make decisions this year, if needed.

QUESTION from the blog Anna_finance:

I have two questions. The first one is about the initiative on the self-ban on loans that was announced quite long ago but has not yet been approved by the legislative authorities until now. Could the Central Bank accelerate the adoption of this law somehow? This is definitely very important as such a law could protect people against loans that might be taken on their behalf by fraudsters. Generally, similar laws appear to be rather efficient, namely the law allowing people to set the self-ban on real estate transactions without their physical presence, based on a power of attorney, for example. Of course, I am not a lawyer, but these situations seem similar to me in a way. It would be great to adopt such a law finally.

My second question is about the exchange rate of the national currency. You have emphasised many times that the exchange rate of the ruble is floating. However, the dynamics of the exchange rate over the past six months shows that the ruble has weakened by 30%. There are certainly multiple factors behind these movements, including the expansion of consumer demand and imports, but the depreciation of the national currency by 30% over a half of the year is definitely arousing anxiety. Possibly, this is a sort of ordinary question. Could you give any recommendations to people regarding savings and how to make them properly? Is it worth distributing the funds across various savings alternatives and diversify them considering the current situation with the ruble exchange rate? It would be great if you could advise something.


As to the self-ban, we are supporting this initiative very actively. Just as you, I believe that we will thus provide an additional tool to people for them to protect their interests against fraudsters. However, the final decision is to be made by the State Duma. We are communicating with the lawmakers in order to accelerate the adoption of this socially important law.

Speaking of the floating exchange rate and advice to people, as you know, the ruble exchange rate is really floating and depends on multiple circumstances, including the environment in external trade and so on and so forth. Mr Zabotkin will provide more details.

However, if we are talking of savings alternatives, of course, I can only recommend ruble savings as they support the purchasing power of the ruble, which is the amount of rubles one needs to purchase a certain quantity of goods and services. Our policy is aimed exactly at ensuring price stability in order to preserve the purchasing power of the ruble, ruble savings and ruble wages.


Possibly, it is worth giving some additional facts concerning the exchange rate. The important thing is what level you have chosen for the comparison. Last year, the exchange rate was fluctuating very strongly. In summer, the ruble significantly strengthened. If the exchange rate is compared against the levels of June 2022, this is a considerable weakening. However, apparently, it would be more appropriate to compare the exchange rate against the level as of early 2022, and this comparison shows that the ruble has weakened against the US dollar by about 11% from the beginning of January 2022 until now. Over the same period, the ruble has weakened against the euro by 5% and against the yuan — by 3%.

Therefore, it would actually be not quite right to say that the ruble has considerably weakened as a result of all the events that happened over the past 18 months.

QUESTION from Vedomosti:

In the middle of May, Mr Zabotkin said that the Bank of Russia would consider the possibility of publishing the range of the ruble exchange rate if this did not provoke any risks that the market might perceive such a publication wrongly. At what stage is this discussion now? How probable is it that the Bank of Russia decides to publish the range of the ruble exchange rate?

My second question is also about the blocked assets. Currently, there is an idea in the market of using the blocked assets of Clearstream and Euroclear in Russia to compensate for the losses incurred by Russian investors. This has been recently said by Mr Peskov. What is the Bank of Russia’s view concerning this issue?


As regards publishing the range of the ruble exchange rate, this issue is currently under discussion. We are really considering this option and are aware that the forecast of the exchange rate is a critical factor in business plans of many companies and so on. However, it is essential that market participants do not perceive this as the Central Bank’s obligation to ensure this level because the exchange rate is floating.

We really need to be sure that a wide range of economic agents will not perceive this exchange rate forecast as a target. We are not targeting the exchange rate — we are targeting inflation.

We have also explored the experience of other central banks: some of them publish such a forecast, while others do not. I think that we will make a decision in the course of the Monetary Policy Review.

As to the use of the blocked assets, technically, an exchange of the frozen assets is possible, in our opinion, but this should be exactly an exchange as the assets of both parties have been frozen. They have not been seized and thus cannot be used to compensate for anything. We are considering various options for exchanging the blocked, frozen assets.

QUESTION from Interfax:

My question continues the topic of mortgage lending which is not trending today, strange as it may seem. From the day of the previous meeting of the Board of Directors, there have emerged several publicly discussed mortgage-related schemes, so to say. First of all, the Central Bank has revealed a growing percentage of mortgages issued for 30 and more years. How is the regulator going to track these loans? What regulation is the Bank of Russia planning to apply?

Second, the Central Bank’s Financial Stability Review mentions schemes with a lump-sum payment allowing a customer to receive a discount on the interest rate on a mortgage loan. How is the Bank of Russia planning to suppress these schemes and do they comply with its new regulation that became effective at the end of May?

One more question, if I may. Not so long ago, you visited Iran. Could you say what agreements have been reached? When will Iran start accepting Mir cards, for instance? What other measures related to mutual settlements are planned between Russia and Iran? What is planned to be done in this area by the Bank of Russia and the Central Bank of Iran?


Speaking of mortgage lending, indeed, there have emerged new schemes. We are studying them, including those with extended maturities and a lump-sum payment, to comprehend their inherent risks primarily for borrowers and for banks issuing such loans.

Most probably, in some cases, maybe even in lending with a lump-sum payment, efforts should be taken to properly inform borrowers of the specifics of this financial product if it does not involve such additional risks for creditworthiness in the future, among other things.

Currently, we continue exploring these schemes. In our opinion, their inherent risks are not as serious as those created by subsidised lending from developers, but these new schemes should still be explored. Where needed, we will take appropriate measures. Nevertheless, it appears that some cases would only require banks’ obligation to disclose clear, fair and precise information on such products.

As you remember our position, we will initiate the standardisation of mortgage loans according to law if opaque schemes multiply.

As to Iran, we discussed a broad range of issues related to settlements, including the mutual acceptance of payment instruments. This work in underway, but normally we do not disclose any details about international settlements with other countries.

QUESTION from Frank Media:

My first question is as follows. The Belgorod Region that is now under fire traditionally accounts for a quite large share in the agroindustrial complex. It concentrates nearly 15% of all enterprises, many of which are rather large borrowers. Is the Central Bank going to take any measures with regard to loss provisioning for such loans? Should creditors expect new easing measures in this connection?

And question two, please. Recently, VTB completed the placement of an additional issue of its shares in the market, and, according to our information, a part of these shares were purchased using pension resources. Such a practice when non-governmental pension funds (NPFs) invested pension resources in banks’ and other financial institutions’ shares was previously typical of the so-called Moscow pension and banking group, but seemed to have been abandoned over time. What do you think about the revival of this practice? Do you believe that this is a normal practice for an issuer to refuse to disclose its anchor investor at an IPO and SPO?


Speaking of the situation with the agroindustrial complex in the Belgorod Region, the effective regulation already allows banks not to increase the loss provisions for three years where a borrower’s financial standing worsens due to emergencies. Therefore, they may rely on the effective standard, in our opinion. If any additional measures are needed, we will certainly consider this question.

As regards additional issues, we do not comment on any particular banks, but this is definitely not about a revival of the group or the earlier problem. This was really a public offering. After the Bank of Russia received the status of the megaregulator and the powers to supervise NPFs as well, our tool set for supervising NPFs, including stress testing, has changed considerably and become more efficient. Of course, we do not coordinate every offering or every purchase of assets by a pension fund as these assets should be acquired in accordance with the announced investment policy. Nevertheless, we are carrying out stress testing to check that they ensure long-term financial stability. Where an additional issue is placed through a public offering — if we are talking of share offerings in general — this means that the issue documents do not list potential buyers. Accordingly, in terms of the securities regulation, anybody can become an investor at a public offering.

QUESTION from the project Prostaya Ekonomika:

Over the past six months, the Western banking system again faced bank runs, which entailed several bankruptcies and the acquisition of banks by larger market players. This happened despite the fact that some of the bankrupt banks had been holding their assets in a rather conservative form, namely government securities. Considering these events, is the Bank of Russia going to adjust the required ratios for domestic banks or are the Russian banking sector and stock market still at a development stage that cannot cause any concerns about this?


Indeed, we are exploring the international experience and foreign banks’ bankruptcies very attentively in order to learn from the mistakes of others.

In the case of the latest banking turmoil — US medium-sized banks’ solvency, the problem occurred because banks had been making long-term investment from short-term liabilities, deposits that might be withdrawn from banks very quickly using the modern technologies. Indeed, these funds were invested in reliable government bonds. However, after interest rates had risen and these securities had depreciated, many banks did not revalue them, but put them in the portfolio for redemption. When depositors started withdrawing their funds, this provoked losses almost instantaneously.

Hence, this situation is certainly encouraging us to reassess the regulation of liquidity risks. The Bank of Russia will revise the liquidity ratio until the end of the year. By the way, we were planning this revision even before the US banking crisis in order to take into account our specifics, the market structure, and the liquidity of various instruments. We will be gradually introducing the updated ratio in 2024–2025, as scheduled. Besides, we are certainly closely monitoring interest rate risk management as long as the turmoil in the USA was actually caused by problems in interest rate risk management.

In 2020, we already gave recommendations to banks on how they should manage interest rate risk. We will analyse whether we need any other adjustments in this regard, but interest rate risk should definitely be in the focus of attention.


Of course, both banks and the supervisory function of the Central Bank should closely monitor interest rate risk. However, I would like to emphasise what we already said, as far as I remember, back in March. The events in the USA and Europe were largely associated with a long period of low interest rate policies. Everyone had got used to them and believed that interest rates would be zero or close to zero further on. When inflation sped up and the authorities had to respond to this acceleration through monetary policy measures, the banking system was already unable to cope with this. In other words, these are the side effects of the extremely accommodative monetary policies pursued in previous years.


I totally agree with this.

QUESTION from Forbes:

My first question is about the FATF meeting to be held in June. It has been reported increasingly frequently that Russia might be put on the ‘grey’ or even ‘black’ list. How likely is such a scenario? Have you discussed it with financial market participants? What consequences might Russian banks and financial companies face if Russia is nonetheless put on the ‘grey’ or even ‘black’ list?

My second question is about the yuan. At the end of May, bankers were concerned about the deficit of yuan in Russia. Is this deficit a temporary problem rather caused by some companies’ local needs, in your opinion, or is it a persistent situation associated with an overall expansion of imports from China to Russia and an increase in Russian companies’ demand for yuan loans?


Speaking of the FATF, first of all, I would like to remind you that, back in 2019, the FATF carried out a comprehensive evaluation of the Russian anti-money laundering system, and we received quite high scores. This anti-money laundering system continues to operate efficiently. Of course, there should be material structural defects in this anti-money laundering system that would justify the inclusion in this ‘grey’ or even ‘black’ list. There are no reasonable grounds for this, in our opinion.

If the FATF makes a politically charged decision, it might certainly complicate the system of settlements as this will require more time for compliance procedures in international settlements. This will entail negative consequences.

As regards the yuan, we are really observing short-term fluctuations of the yuan exchange rate in the market. Among other things, this is because the earnings in yuan are credited unevenly, that is, the supply of yuan is uneven. In order to smooth out such short-term fluctuations, we have launched the instrument CNY/RUB FX swap with the limit of 10 billion yuan. Companies utilised less than a half of this limit even during the days when the demand peaked, and the latest transactions were conducted about a month ago. Currently, the situation has become slightly steadier. Nevertheless, such fluctuations might certainly occur. By the way, the same was also true for both the US dollar and the euro. We had special instruments — USD/RUB and EUR/RUB FX swaps — to smooth out such short-term fluctuations in liquidity.

However, as to the yuan, such fluctuations might occur more frequently and be more significant. This is because the yuan has certain restrictions, although it is a reserve currency. Russian market participants, including banks and non-financial organisations, should definitely be aware of these specifics and manage these liquidity risks considering that the proportion of yuan in the foreign currency composition has increased.


It is worth emphasising that the yuan that is in circulation in the Russian FX market is the offshore yuan. This is not the yuan used by the Chinese economy for its internal needs. In a sense, this is another currency. Therefore, the interest rate on it may differ from the interest rate in Shanghai, whether in the money market or with longer maturities.

This is why deviations of the yuan exchange rate in Russia from that in China will continue, depending on the ratio of the demand for and supply of yuan and the liquidity level of the yuan inside the country.

In terms of insurance mechanisms, the CNY/RUB FX swap that Ms Nabiullina has spoken about performs its function similarly to how this was done when the USD/RUB FX swap was used until 2022.

Nevertheless, it is essential to differentiate between liquidity management and the situation with funding. Probably, what you mean is that banks are increasing lending in yuan. To do this, they need yuan funding rather than yuan liquidity. The only way to receive an additional amount of yuan funding is to raise yuan deposits, and banks are mostly doing this. Interest rates on yuan deposits have been rising in recent months.


Thank you for attention. Have a nice day.

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