Phased replacement of Bank of Russia special-purpose refinancing instruments with market mechanisms

The Bank of Russia Board of Directors approved a medium-term strategy for a phased withdrawal of Bank of Russia special-purpose refinancing instruments (hereinafter, the Strategy). The Bank of Russia resorts to the use of special-purpose bank refinancing instruments (hereinafter, the special instruments) as non-standard temporary measures designed to back up and encourage lending to the economy’s segments. The highest demand for these instruments was registered during external shocks followed by lower credit availability. Currently, the economy has turned to growth and market rates are falling. This makes availability of credit more uniform across sectors and reduces the need for special instruments.

The strategy is aimed at a piecemeal reduction of concessional lending as it is replaced with market mechanisms. One of the Strategy’s key principles is to avoid worsening of conditions on previously issued loans.

The pace at which the Bank of Russia will curtail its indirect support will depend on the movements in the Russian economy and higher availability of market financing. The respective terms will be determined and, if necessary, updated based on the medium-term macroeconomic development scenarios elaborated by the Bank of Russia.

The Strategy will be implemented piecemeal during several years. At the first stage, the Bank of Russia will cease to increase limits on all special-purpose refinancing instruments from 2 October 2017, but will continue to issue loans under special instruments. The respective Bank of Russia programmes to support lending will be completed with due account taken for the maturity of loans already issued under these mechanisms.

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