Growth of structural liquidity surplus in August

Structural liquidity surplus increased in August, which was primarily driven by further growth in demand for the Federal Treasury's funds among banks. These are the findings given in the new issue of the Banking Sector Liquidity and Financial Markets commentary.

The spread between interbank rates and the key rate changed only slightly. Money market rates stayed in the lower half of the interest rate corridor close to the Bank of Russia key rate. In August, their dynamics were affected, among other things, by higher costs of foreign-currency borrowings in the FX swap segment. The interest rate spread in the FX swap and interbank lending segments continued to shrink on the back of the seasonal decrease in major banks’ foreign-currency liabilities and oil price decline.

The situation in the Russian financial market was moderately negative in August. This was largely caused by falling demand for high-risk assets in global markets amid concerns about potential aggravation of the trade war between the USA and China.

At the end of 2019 Q2 – beginning of 2019 Q3, all key segments of the credit and deposit market recorded declining interest rates. In July, activity in the corporate segment of the lending market slightly decelerated, mainly due to loans granted to non-residents, which contributed to a further reduction in the share of foreign currency in the credit portfolio. Retail lending continued to slow down, in terms of both mortgage and consumer loans.