In 2010, with a view of stimulating banking lending, the refinancing rate of the Central Bank of Russia was reduced from 8.75% as of the beginning of the year to 7.75%, a historically lowest rate in modern Russia. The rate increased to 8.00% on February 28, 2011. The crediting rate on direct REPO deals, which represents actual refinancing rate of banks in Russia, was even lower, 5 to 6% at the 2010 year-end. The mandatory bank reserve requirements remained at a lower level against the recession period. On December 27, 2010, President Medvedev D. A. signed a federal law which extended till July 1, 2011 the moratorium on exclusion of banks from the deposit insurance system for non-observance of the requirements to a package of estimates related to appreciation of capital, assets, profitability and liquidity, as well a series of mandatory requirements.
In general, one may say that as of the beginning of 2011, the Russian banking system suffered from excess of short-term loans and outrunning growth in bank deposits against lending growth rates rather than from lack of such loans.
Asker-zade N.. A Good Bargain. Vedomosti. February 14, 2011.
Financial Markets and Financial Institutes 3.3.2. Liquidity and Current Stability of the Banking System From the very onset of the recession period between August and September 2008, Russian banks became a target of large-scale support from the Bank of Russia and the Ministry of Finance. The model of financing through carry trading was replaced by the model of financing through loans from monetary and public authorities. Such a support was given on the basis of repayment financing. As early as late 2009, main bridge financing recourses were withdrawn from the banking system. In 2010, not only did the banking system recovered but also outran the level of its pre-recession short-term liquidity through predominantly domestic borrowings in the form of back deposits, reinforcement of corporate bank accounts, public spending growth (see Fig. 17).
3 Net claims to the Bank of Russia - total 2 2 Net claims to public agencies - total 1 1 1 2 1 775 1 1 1 1 1 1 423 1 1 1 1 1 1 1 234 1 1 1 000 703 695 578 501 371 240 230 230 197 -11 --111 -13 -----500 2008 2009 ----1 000 -814---1 -1 -1 -1 -1 -1 -1 -2 Source: based on the data published in the Credit Institutions Review of the Bank of Russia.
Fig. 17. Bank support assessment, bln RUB In July 2008 net claims to the Bank of Russia and public agencies totaled nearly RUB 1,5 t, i.e. banks were creditors of the Central Bank of Russia and public agencies. The amount of money which banks maintained on deposit and correspondent accounts with the Central Bank of Russia, in bonds of the Bank of Russia and government securities, exceeded by the foregoing amount a small size of the loans obtained from the Bank of Russia and deposits of public agencies. Beginning with September 2008, the situation changed drastically as the Central Bank of Russia and public agencies became net creditors of banks. At the onset of the recession it was decided to reduce mandatory reserves requirements, allocate temporarily budget and state-owned corporations’ idle money in banks, support the practice of loans to banks from the Bank of Russia through direct REPO deals and then unsecured and other types of loans. The support to banks was focused on loans from the Bank of Russia. net liabilities owed by banks to the Central Bank of Russia and public agencies totaled RUB 975 bln as early as October 2008 and RUB 1,3 t in November. In January 2009 net liabilities owed by Jul Jul Jul Jan Jan Jan Jun Jun Jun Oct Oct Oct Feb Feb Feb Sep Sep Sep Apr Apr Apr Dec Dec Dec Mar Mar Mar Aug Aug Aug Nov Nov Nov May May May RUSSIAN ECONOMY IN trends and outlooks banks reached a maximum of RUB 1,5 t. Hence banks as net creditors of public agencies, RUB 1,5 t, turned into net debtors owing the same amount to the public agencies, which means that maximum support to banks through lending totaled nearly RUB 3 t.
Beginning with February 2009, i.e. from the moment when the Russian Stock Market resumed its growth, the Ministry of Finance and the Bank of Russia launched a policy of gradual “withdrawal” from the banking system. In December 2009 banks resumed to be net creditors of the Bank of Russia and public agencies, RUB 703 bln and RUB 584 bln, respectively.
In December 2010 these figures reached RUB 2546 bln and RUB 823 bln, respectively. Excessive liquidity which was accumulated in the banking system, became a new problem thereby increasing substantially risks of inflationary pressure on the economy.
Fig. 18 shows the same data by volume of banks’ net claims to the Bank of Russia and public agencies in relative terms against assets of the banking system. The data also shows that the net creditor status against the Ministry of Finance and the Central Bank Of Russia is a typical situation, save for deviations from the situation amidst financial crises. However, both sources and trends of allocation of excessive banking liquidity changed substantially. Late in the 90s – early in the 00s, most of the banking liquidity was spent to purchase government securities, in many cases in prejudice of lending to the real sector. Therefore, decrease in bank loans to the Ministry of Finance reflected a positive, upward trend in lending to the real economy in general. Obviously, this was a positive event as soon as the trend resumed after the recession period between 2008 and 2009.
Slower recovery of banks as creditors in relative terms after the current financial crisis against the crisis of 1997–1998 reflects serious changes in the sources of bank credit resources. While it was cheap and short-term foreign exchange loans in external markets that served as such source on the eve of the crisis in 1998 and between mid-2000s and the crisis of 2008, liquidity of the banking system was generated by relaxing the domestic monetary policy by financial authorities in 2009–2010. Keeping this in mind, it seems that beginning with the late 90s, the vector of development of the banking system was heading the right direction in general, i.e from lending to the Ministry of Finance through the risk-bearing carry trading strategy towards lending to the real sector through the same strategy and, finally, towards an attempt to grant retail and corporate loans through internal financial recourses. The problem is whether or not the banking system is able to keep this development vector.
Fig. 19 provides analysis of different form of loans to banks from the Bank of Russia. Unsecured loans which the Bank of Russia began to grant on October 20, 2008, were the main type of credit support to banks during the recession period. This type of lending is not traditional for the central banks in other countries, given a serious credit risk to which the Bank of Russia is exposed. Lack of relationship between these tools and size of credit portfolios of banks, save for loans secured by different assets (Fig. 13), was typical of the credit support which the Bank of Russia offered to banks during the recession period. This may be a reason for such strong support to banks by the Bank of Russia which assumed a serious risk exposure, the retail and corporate credit portfolio of banks failed to grow in the recession period.
Beginning with September 2010, different programs on bank support from centralized loans were nearly discontinued, which is not surprising amidst a fast growth in liquidity at banks in 2010.
Financial Markets and Financial Institutes Net claims to the Bank of Russia 30 26,7 26,Net claims to public agencies 24,23,Changes in nominal RUB/USD exchange 19,rate (right-side axis) 16,16,15,12,11,10,3 10,10,0 9,1 9,2 9,2 7,8,6,6,4 6,5,4,3 3,3,2,9 2,2,0,0,7 2,-0,-2,-5 --4,1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1.8.08 2008 2009 Source: based on the data published in the Credit Institutions Review of the Bank of Russia.
Fig. 18. Banks’ net claims to public agencies and the Bank of Russia (as % of assets (liabilities) value) 3 000 000 Volume of other loans Volume of intraday loans 2 500 Overnight loans outstanding 2 000 Collateral loans 1 500 000 Unsecured loans outstanding 1 000 500 Source: based on the data published by the Bank of Russia.
Fig. 19. Bank of Russia loans to banks, RUB mln Short-term loans to banks through direct REPO deals was the most traditional method which the Bank of Russia applied intensively to stabilize the banking system during the recent recession period. Fig. 20 shows three periods in the development of the Russian banking sys 18.104.22.168.22.214.171.124.126.96.36.199.188.8.131.52.184.108.40.206.220.127.116.11.18.104.22.168.22.214.171.124.126.96.36.199.188.8.131.52.184.108.40.206.220.127.116.11.18.104.22.168.22.214.171.124.126.96.36.199.188.8.131.52.184.108.40.206.220.127.116.11.18.104.22.168.22.214.171.124.126.96.36.199.188.8.131.52.RUSSIAN ECONOMY IN trends and outlooks tem, where each period depends a specific source prevailing in support of liquidity. The first period, which lasted from the beginning of the 2000s till 2003, was characterized as moderate liquidity after the recession of 1998, when banks were funded preliminary with internal sources and interest rates were very high in the interbank market. The second period, which lasted from 2004 till July 2008, was marked by a boom of the carry trading strategy, when banks could borrow cheap in foreign markets. Inflow of foreign cheap short-term money resulted in excessive liquidity in the banking system and low loan interest rates in the interbank market. The third period began in August 2008, i.e. from the onset of the current financial crisis. The period is characterized by temporal discontinuance of the carry trading strategy, which resulted in a fast growth in loan interest rates as well as subsequent state intervention which replaced non-resident money with public funds thereby smoothing the situation in the interbank market. Later, when the market began to recover, banks generated sufficient liquidity, interbank loan interest rates resumed the previous, pre-recession level. Beginning with July 2010, volume deals in the direct REPO market slumped and such loans became irregular due to thin market in December of the same year and discontinued in January 2011. “Exhausted” direct REPO loans coincided with revocation of the banking license from International Industrial Bank, which allows one to suppose that the Bank of Russia used intensively this tool to support the financial situation in this problem bank in 2009 and H1 2010.
1 400 25,1 20,1 Moderate liquidity Recession and High liquidity zone zone recovery 15,10,5,0 0,Monthly average c/a balances of banks Monthly average banks’ deposits with the Central Bank of Russia Interest rates in the interbank loan mar-ket, 2 to 7 days Interest rates in the interbank loan market, 8 to 30 days Source : based on the data published by the Bank of Russia.
Fig. 20. Average monthly bank liquidity and interest rates in the interbank loan market in 2001 – January Liquidity, RUB bln Interest rates, % p.a.
Financial Markets and Financial Institutes Fig. 21 shows relation between interest rates in the interbank loan market with direct REPO. In the period of growing liquidity the Bank of Russia employed direct REPO deals only in specific cases and in moderate scale. From the onset of the financial crisis, direct REPO deals were more frequent for the purpose of stabilizing the situation in the interbank loan market. Such deals began to close on a regular, daily basis and their volumes increased rapidly against the prerecession figures. Stabilization of the situation with short-term liquidity at banks in 2010 resulted in reaching the pre-recession interest rate in the interbank loan market, and eventually the Bank of Russia refused to employ direct REPO on an intensive basis.
Recession and market 35 recovery Lliquidity growth period 0 banks’ c/a balances with the Central Bank of Russia Direct REPO Interest rates in the interbank loan mar-ket, 2 to 7 days Interest rates loans through direct REPO Source: based on the data published by the Bank of Russia.
Fig. 21. Using direct REPO for regulating bank liquidity in 2003 – February 3.3.3. Towards Recovery of International Reserves As shown in Fig. 22, in July 2008 the international reserves reached a maximum of USD 597 bln. When the recession was in full swing in February 2009, the international reserves reduced to USD 384 bln., i.e. by USD 212 bln. Most of the reduction resulted from sale of foreign exchange by the Bank of Russia in the course of the so-called “regulated devaluation” of the Ruble, when the RUB weakened against the US dollar from RUB 23,45/1USD in July 2008 to RUB 35,45/1USD or by 51.2% in February 2009. Unlike August 1998, the devaluation was extended for as long as six months to allow banks and individuals to exchange some of their ruble assets with US dollars or restructure foreign currency debts.
The fact that the Bank of Russia sold foreign exchange, even at undervalued exchange rate, in the period of regulated devaluation didn’t imply complete loss of the international reserves, as a part thereof was simply converted into growth of the Bank of Russia’s ruble assets, which were used for a large-scale lending to the banking system (see Fig. 17 and 19). Between February and October 2009, the RUB strengthened against the US dollar from RUB 35,45/1USD to RUB 29,05/1USD or by 18.7%. The large-scale granting of ruble loans to banks concur RUB bln % p.a.
Материалы этого сайта размещены для ознакомления, все права принадлежат их авторам.
Если Вы не согласны с тем, что Ваш материал размещён на этом сайте, пожалуйста, напишите нам, мы в течении 1-2 рабочих дней удалим его.