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Bank of Russia Governor Elvira Nabiullina speaks in follow-up to Board of Directors meeting
In her speech, Elvira Nabiullina said that against the backdrop of sanctions, the conditions for the Russian economy have altered dramatically. The ruble exchange rate has changed considerably, the opportunity for Russia to use its gold and foreign currency reserves has also been limited. In view of that, the Central Bank has to react to what is happening in order to maintain the financial stability of the Russian economy.
The main decision was to almost double the key rate to raise it to 20%. This is necessary to maintain the attractiveness of deposits and protect the savings of citizens. High rates, according to Nabiullina, compensate citizens for increased inflationary risks.
The Central Bank Governor also spoke about the liquidity of the banking sector.
“The Bank of Russia is continuously providing cash and non-cash rubles to banks. Due to the high demand for cash, the banking sector is now experiencing a structural liquidity deficit. Banks have sufficient collateral to increase the amount of liquidity raised from the Bank of Russia, if necessary,” said Elvira Nabiullina.
According to the Central Bank Governor, the regulator carried out FX interventions totaling one billion US dollars on Thursday and in a smaller amount on Friday. Due to restrictions on using the gold and foreign currency reserves in dollars and euros, interventions were not carried out on February 28.
“The government announced the decision obliging enterprises to sell 80% of their export revenues. This measure will help ensure an even supply of foreign currency in the domestic FX market to meet importers’ and households’ needs. Moreover, the Bank of Russia is taking a range of steps towards limiting the withdrawal of capital by non-residents,” Nabiullina informed.
The Central Bank Governor said the restriction on securities sales by non-residents have already been introduced. The Central Bank is prepared to promptly take all necessary measures to support the banks and has adopted a number of regulatory relaxations to make it easier for them to operate in the new environment.
“As part of countercyclical macroprudential policy, we have released the accumulated buffers for all loan types, including foreign currency loans to companies and household loans. These measures are equivalent to an increase in banks’ capital by 900 billion rubles. In the current situation, it is very important to support not only banks, but also their customers. As a result of the imposed sanctions, households and companies are also experiencing a deterioration of their financial position. So, we recommend that banks should meet the needs of their clients approving loan restructuring without imposing any penalties or fines on such loans. This applies to loans of both households and businesses. At the same time, banks are allowed not to lower borrower’s financial ratings and debt servicing quality,” said Elvira Nabiullina.
As for the possibility of disconnection of Russia from the SWIFT system, the Central Bank Governor emphasized that the financial infrastructure will continue to operate smoothly, because Russia has the financial messaging system (FMS) that can replace SWIFT within the country and allows the connection of foreign participants. Cards of international payment systems issued by the sanctioned banks will continue to operate within the country as usual.
You can watch the video of Elvira Nabiullina's report on our Telegram channel here:
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