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Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 23 October 2020

23 October 2020

Today, we have made the decision to keep the key rate at 4.25%.

The economy continues to recover, albeit at a slower pace than in summer. Financial markets are still characterised by elevated volatility, and geopolitical risks persist. Moreover, the epidemiological situation is deteriorating, which may increase demand-side disinflationary pressure.

I would like to dwell on the factors we considered today.

Firstly, inflation processes are generally evolving in line with our baseline scenario. We forecast that inflation will come in at 3.9–4.2% by the end of the year.

Stable inflation indicators are close to 4%. However, demand- and supply-side factors are changing unevenly, having different impacts on prices in individual goods and service groups. The effect of pent-up demand on inflation has been mostly exhausted. The weakening of the ruble continues to affect the price growth rate. This is evident in non-food categories in the first place.

There is also a range of one-off factors temporarily slowing down the rise in service prices. Specifically, given the current epidemiological situation, the authorities have recommended to limit the increase in prices for educational services. A number of regions have made decisions on only partial indexation of housing and utility rates. Further on, these prices may adjust over time, and we take this into account in our inflation forecast.

Secondly, inflation expectations have increased. To a certain extent, they are responding to exchange rate fluctuations. Businesses are also reporting a rise in costs.

Thirdly, the economic recovery has slowed down, predominantly due to domestic demand trends. This is evident from investment and consumption trends, as well as the leading indicators of consumer and business activity. As noted above, the positive effect of pent-up demand has been mostly exhausted by now. This demand was driving the fast revival of economic activity immediately after the cancellation of the restrictions imposed in spring and summer. This recovery was primarily recorded in sectors focused on consumer goods production. The revival in intermediate goods industries was less pronounced. However, the deteriorating epidemiological situation is hampering the growth of consumption expenditures, affecting companies’ investment plans.

It is still highly uncertain how fast the global economy will be recovering, especially with account of repeated restrictions being imposed in a number of countries. The economic environment is also being affected by geopolitical factors, including trade tensions, the Brexit situation, and the upcoming elections in the USA. The decline in sentiment is increasing volatility in global markets. In such conditions, external demand may hardly be expected to support the economy.

The fourth factor is monetary conditions. We can see that the earlier decisions on the key rate continue to translate into the easing of monetary conditions and banks’ pricing policies. Along with the decrease in interest rates, non-price lending conditions are also easing.

In addition, we also factor in that the preferential corporate and retail lending programmes are becoming increasingly important. In August, the portion of subsidised mortgage loans exceeded 35% in the overall amount of loans disbursed. The total monthly amount of issued mortgage loans hit its record high. As regards lending to small and medium-sized enterprises, the percentage of short-term loans issued at interest rates that are close to 2% per annum rose in August from one-fourth to one-third of their overall amount. These programmes are also indirectly influencing the general pricing environment in the credit market. In the future, we will be estimating how monetary conditions are adjusting as these programmes terminate.

Now, I will proceed to the forecast. Today, as always after the core meeting, we have published our updated baseline scenario. When revising our forecast, we considered a range of factors. The ruble has weakened. The period of the recovery growth, that is, the initial rebound after the lifting of the spring restrictions, has almost ended. The epidemiological situation is deteriorating, which is already affecting economic activity. Nonetheless, export dynamics have turned out to be better than expected, for both oil and gas exports and the exports of other goods, especially gold.

Taking into account the overall impact of competing factors, the GDP forecast has been revised upwards. According to estimates, GDP will go down by 4–5% as of the end of 2020, which is better than it was expected in July.

As to domestic demand indicators, their overall dynamics as of the end of 2020 are expected to be worse than forecast in July. This is associated with the released data on GDP components for the second quarter. The restrictions that were in place over this period had a stronger negative impact on both investment and consumption than it had been assumed. However, the recovery in the third quarter was also faster than forecast. Furthermore, as you know, GDP results for the second quarter were generally better that our preliminary estimates. This was associated with higher exports indicators over this period, compared to our expectations.

Amid the deterioration of the pandemic situation in the fourth quarter and possibly at the beginning of 2021, economic revival will be somewhat slower than we forecast earlier. Therefore, GDP growth in 2021 has been revised downwards by one-half of a percentage point, to 3–4%. Making this adjustment, we took into account the effect of the higher base of 2020, given that the 2020 GDP forecast has been improved.

Now a few words about the 2022–2023 horizon. At the moment, our forecast assumptions and parameters have remained unchanged. The economy will expand by 2.5–3.5% in 2022 and by 2–3% in 2023. We still expect that we will return to the pre-crisis level in the first half of 2022.

Given the current monetary policy stance, inflation is forecast to stand at 3.5–4.0% in 2021 and further remain close to 4%.

Regarding the balance of payments forecast, it has been significantly updated, primarily due to the upward adjustment of export estimates. The current account is expected to be notably higher over the entire forecast horizon. This is related to both the adjusted volume and the expected price environment for Russian export products. We have updated the 2021 average oil price assumption from $40 to $45 per barrel taking into account the current price movements and assuming that the situation in the oil market will remain stable.

Regarding the fiscal policy, we build our baseline forecast on the figures specified in the draft Fiscal Policy Guidelines for 2021–2023. However, when making our key rate decisions, we will consider potential adjustments in the measures implemented by the Government.

Another factor that we take into account is the specifics of the operation of the transmission mechanism in the current conditions. Increased financial market volatility requires that we consider financial stability aspects in our key rate decisions. In a normal situation, cutting the key rate should prompt a decline in interest rates on all financial instruments and a certain weakening of the ruble, which altogether would lead to an easing of monetary conditions. However, in an unstable situation in financial markets with elevated risks, a key rate cut could lead to an increase in interest rates on long-term financial instruments and a more pronounced reaction of the exchange rate than in steady conditions. As a result, monetary conditions could even tighten. Therefore, we should carefully use our room for monetary policy easing given potential financial stability risks.

In conclusion, I would like to speak about our further steps. As I have already said, the worsening of the pandemic situation will have mainly disinflationary effects. A potential slowdown in the global economy will have similar consequences. At the same time, short-term proinflationary risks stemming from the situation in financial markets have strengthened recently. The upward pressure on prices can also be exerted if the epidemiological situation causes a notable influence on both demand for and supply of goods and services. Although the ratio of proinflationary and disinflationary factors may change over the short-term horizon, we believe that disinflationary risks prevail in the medium term. Therefore, we still see room for a key rate decrease.

A more significant influence of disinflationary factors may require more prolonged and, potentially, more pronounced accommodative monetary policy than it is currently stipulated in our baseline scenario.

However, we also take into account that it is important to ensure that our monetary policy is stable under any scenarios in order to maintain inflation close to 4%. This is especially important today when so many diverse factors are influencing the current situation.

Q&A for the Media

QUESTION from Reuters:

Is there still any chance that at its last meeting this year, in December, the Board of Directors will cut the key rate, after the main geopolitical risk related to the US elections materialises?


We do confirm that there is still some room for reducing the key rate, especially given that the worsening epidemiological situation is amplifying disinflationary pressures. However, making our decisions, we will certainly assess current indicators, adjust our forecasts and estimates, as well as consider geopolitical factors and the situation in financial markets.

What does this mean? This means that at its every meeting the Board of Directors will analyse whether we may use this room to make proper decisions.

QUESTION from TASS Agency:

Last week, the Ministry of Finance submitted the draft resolution to the Government aimed at extending the programme until mid-2021. Earlier, there had been a discussion regarding its extension until the end of the year. What duration would be optimal, in your opinion? Would the extension of the programme cause overheating in the mortgage market?


We have supported the extension of the programme until the middle of next year. In our opinion, this programme is really efficient and highly requested and has actually proven to be a very successful anti-crisis policy instrument.

However, talking of the future, it is essential to consider potential implications. Currently, we can see no risk of overheating, but I would like to stress it — no risk at the moment. We should monitor housing prices very attentively. Why do we need the preferential mortgage programme? The purpose is to improve the affordability of housing for people, and the actual decrease in the key rate is essential in this regard. These key rate reductions have become possible owing to the monetary policy pursued and, of course, the Government’s programmes subsidising the interest rate, for this benefit for households not to be negated by a rise in housing prices.

What does this imply? This implies that when we are stimulating demand through such programmes, we should be confident that supply is not a bottleneck and that there is no surge in prices. Currently, we can observe that the growth of housing prices exceeds inflation.

In my opinion, there is also another factor to be taken into account in the course of the development of the mortgage sector. This is the immaturity of the mortgage industry in Russia, as compared with other countries. Mortgage penetration should increase, but this process should be accompanied by a rise in household incomes. It is critical that the portion of people who can afford a mortgage loan and are capable to service it expands. If preferential programmes only prompt a quicker realisation of households’ deferred demand and this demand for mortgage lending then contracts after the termination of these programmes, this may cause a rather drastic decline in housing prices and, accordingly, make banks review mortgage lending risks, which may thus slow down mortgage lending.

Therefore, it is crucial to analyse the entire cycle in this area so as to avoid such dramatic changes in the mortgage market.

The third aspect I would like to emphasise is that, although this programme is truly a very successful anti-crisis instrument, this is not the reason to make it a permanent one. If the absolute majority of mortgage loans are granted at the subsidised interest rate (that is, not on market conditions, but actually at the administered interest rate, and this is a rather large and growing market segment), this would imply, all else being equal, that we would have to maintain higher interest rates in all other lending segments in the course of pursuing our monetary policy so as to achieve the inflation target.

It is critical to avoid such distortions. Nonetheless, we do support the extension of this mortgage programme until mid-2021 as an anti-crisis mechanism.

QUESTION from Izvestia:

In the comment to its decision, the Bank of Russia’s Board of Directors notes that the recovery growth slowed down in September and various risks increased amid the resurgence of the pandemic. However, the Bank of Russia improves its GDP forecast for both 2020 and 2021. Why? The Bank of Russia’s communications also focus a lot on the rising risk of the materialisation of alternative scenarios. In this regard, why put an emphasis on the baseline scenario?


As to the better GDP forecast, it is really associated with the improved estimates of future exports based on actual export figures. When we devised our previous forecast in July, our estimate of export trends was worse than we are currently observing. This is a key parameter to improve the GDP forecast for this year.

In contrast, we slightly decreased the forecast for the next year, given the effect of the base, which has been talked about, as well as the currently worsening epidemiological situation, among other things.

As regards the alternative scenarios, we do place a greater emphasis on the baseline scenario which we consider to be the main one when making our decisions. However, when there is so much uncertainty, this also involves the risks that the situation might evolve differently. We are now talking of an essential principle of our monetary policy, that is, the robustness of our decisions to various scenarios. In other words, our decisions should be justified, even if these risks start to materialise and the situation unfolds differently.

Unfortunately, there is currently a lot of uncertainty, and other scenarios may materialise as well. For instance, in July, when we prepared our baseline forecast, we actually did not factor in the risks of a deterioration of the epidemiological situation which is currently worsening. We made such estimates in September, and have included them now into the baseline scenario.

We put a greater emphasis on the baseline scenario because we consider it to be the most probable one. We even believe that it is more probable than the totality of all alternative scenarios.

QUESTION from Interfax:

Do you see any risks in the current and earlier weakening of the ruble? Are there any risks to financial stability? Are you observing any rise in such risks? Does this process need any interventions on the part of the Bank of Russia? Do you have such instruments? Probably, this could be not actions directly taken by the Bank of Russia, but rather a discussion with exporters?

My second question is related to federal government bonds. Do you see any risks in the current procedure implemented for banks to purchase federal government bonds at the primary auctions held by the Ministry of Finance when banks use the funds from the Bank of Russia’s long-term repos? Are there any maturity mismatch risks related to these funds?

Do you think that this is actually quasi-financing of the federal budget deficit by the Bank of Russia?


As regards exchange rate movements, we can see no financial stability risks. The exchange rate is driven by a range of market factors and current developments. Markets have sufficient liquidity, and trading volumes are absolutely normal. We can see no material risks in this area. In our opinion, there is no need in our direct intervention or, even more so, communication with exporters. In addition, exporters are quite steadily selling their foreign currency revenues. Therefore, there are no risks in this regard, but our forecasts and decisions certainly take into account current developments.

It should be noted that, although the exchange rate is more volatile this year, its fluctuations are overall comparable on average with those observed in 2018. When there are various events happening, such period of elevated volatility may occur. However, volatility is not only a weakening. By the way, the ruble has become stronger recently.

As regards long-term repos, we can see no risks here either. We provide funds under one-month repos, in the first place, and one-year repos, but these are actually short-term repayable funds. They are needed because banks prefer to bolster their liquidity at the end of the year. At the end of the year, we commonly experience uneven liquidity flows in the budget system. This year, they have actually become more uneven as the budget has been borrowing significant amounts in the market. At the same time, major expenditures will be shifted to the end of the year.

For instance, we can see that the budget deficit was about 200 billion rubles in September, while the budget system’s borrowing in the market totalled slightly more than 800 billion rubles, or 830 to be more exact. Actually, this is approximately banks’ demand for our operations. These funds are really repayable and are sterilised, that is, we carry out simultaneous liquidity-absorbing operations in order to maintain the short-term money market rate in the middle of our operational corridor, i.e. at the level of the key rate.

This is also associated with the problem we have mentioned above — the uneven distribution of liquidity in this market. Therefore, we really see no risks in this area.

QUESTION from Bloomberg:

You have said that your baseline scenario now takes into account the pandemic-related risks and that it may be needed to further ease the monetary policy. Could you please clarify whether you mean the extension of this accommodative monetary policy beyond 2022–2023 or an even deeper reduction in the key rate compared to the baseline scenario presented in September?


This is true. We will be monitoring how the situation evolves. As I have already said, we believe that the current situation increases disinflationary risks for the next year, and our baseline scenario implies that we will continue the accommodative policy next year. The duration of the accommodative monetary policy and the extent of the easing in terms of a decrease in the key rate depend on future developments. We will be analysing the current situation and make appropriate decisions.

QUESTION from Kommersant:

If we compare the medium-term forecast against the one presented on 24 July, the major changes are decreased expectations regarding final consumption expenditures, including household spending, and, simultaneously, the significantly improved estimate of M2. This means that banks provide lending to the economy and households and will probably even expand lending in 2020 compared to 2019.

Do you perceive this as a single process or these are different processes? How is the saving ratio changing in this situation? It seems not to decrease this year, but rather to go up, with this trend also likely to extend to 2021.


This is a really important question how the current situation in general impacts the propensity to save and consume. When we pursue accommodative monetary policy, we are certainly aiming to prop up demand, including consumer demand. However, given the current conditions, including both the epidemiological situation and the economic environment in general, people have reasons to be cautious, so to say. In such a situation, households try to save money if they have no clear prospects or understanding when their incomes recover. This is also the reason for elevated demand for cash we observed. By the way, this trend actually exists in multiple countries.

We are now carefully analysing all data related to households’ financial flows and their deposits, investments in the stock market, and changes in the propensity to save cash and demand for cash. Of course, we compare these data with final consumption expenditures and trends in retail. There is still insufficient clarity in this regard, and we need further analysis because this is undoubtedly a key factor influencing our monetary policy.

QUESTION from Rossiyskaya Gazeta:

Is it possible to state that the weaker ruble became the key reason why the key rate was not revised this time? How important may this factor become by the meeting scheduled for 18 December?


We do take into account the exchange rate of the ruble and exchange rate movements when making our decisions. However, in this regard, we should rather talk not of the impact of the weaker ruble and its role as a key factor, since the exchange rate is taken into account in our inflation forecast. Most likely, the earlier weakening of the ruble will generate a certain proinflationary effect which will remain over the next 9–12 months.

An essential factor was the overall situation in financial markets, global financial markets, and related considerations.

It is now hard to say how important this factor will be in December, since the situation may change in December. We will need to assess it.

QUESTION from Forbes:

The Bank of Russia has worsened its forecast regarding the net capital outflow, increasing the estimate almost twice. What is the reason behind this? What factors did you take into account in the first place when revising the forecast? What are the reasons for changes in 2021 and 2022, as well?


When the exchange rate is floating, capital flows largely mirror the situation with the current account, adjusted for our operations with foreign currency reserves. As I have already said, we have considerably improved our estimates of exports and, actually, the positive current account balance, which is reflected in the dynamics of the capital account, among other things.

QUESTION from RIA Novosti:

Has the pass-through of the ruble’s weakening in August—September to prices completed, in your opinion? How strongly has the weaker ruble affected inflation?


I have already started to talk about the continuing pass-through of the weaker ruble to price dynamics. We believe that this pass-through is extended over time and may take up to 9–12 months. Overall, our ratios of the exchange rate pass-through to prices have considerably lowered against those five years ago, for instance. According to our estimates, the pass-through ratio has decreased threefold. The exchange rate pass-through ratio is currently estimated at 0.05–0.06. Assuming that the exchange rate remains stable further on, the weakening that occurred in August—September will increase inflation by about 1 percentage point approximately in spring 2021.

QUESTION from VTimes:

When the Bank of Russia updated its forecast in July, the exchange rate of the ruble against the US dollar was about 70. Although the ruble weakened by nearly 10% over the last three months, your inflation forecast has remained almost unchanged. What factors have offset the depreciation of the ruble, or did the Bank of Russia expect this weakening?


I have already said that the influence of the exchange rate on prices is still extended over time. Furthermore, there were also other factors. The exchange rate, that is, the earlier weakening of the ruble, is one of proinflationary factors. However, there are also intensified disinflationary factors primarily associated with domestic demand estimates due to the epidemiological situation.

QUESTION from BankNN, Nizhny Novgorod:

On 10 September 2020, the Bank of Russia released the first draft of the Monetary Policy Guidelines for the next three years. The forecast growth of real money supply is moderate, estimated at 4–5% a year. Does this mean that it is not worth hoping for an economic breakthrough in the next three years or the Central Bank is already preparing amendments to the released draft?


Firstly, I would like to say that the main source of money supply is not currency issue by the Central Bank, as many tend to believe, but rather bank credit. The connection between economic growth and lending rates is two-way. In other words, if banks can see economic growth prospects, they are more willing and ready to provide lending. The expansion of lending, in its turn, definitely supports economic growth. That being said, the willingness of banks to lend and of corporate and retail borrowers to raise loans primarily depends on the expectations of economic agents (both businesses and individuals) regarding economic growth and future changes in the economic situation. Households should also comprehend what incomes they will have when servicing their loans. Therefore, this is a two-way connection. I would like to give more exact figures: we estimate that as of the end of 2020 money supply will expand by 14–17% in nominal terms, which is above 10% in real terms. Of course, this is the result of the increase in bank lending this year. Currently, lending growth rates are higher than last year.

QUESTION from CoinDesk:

The Central Bank recently released its report on issuing a digital ruble. Why is such a project currently of interest to the Bank of Russia? How feasible is it to launch such a project in the near future, in your opinion? Do you receive a lot of feedback to this report?


We can see that this report has really aroused public interest, and we are already receiving feedback. We hope that there will be more comments in this regard. We are really interested in an extensive discussion of the potential introduction of a digital ruble with the general public, companies, the business community, with all parties concerned. On the one hand, we can see that this project is quite promising, in our opinion, and it very naturally fits into what is called the development of the digital economy in general. Digital transformation is currently underway, and the payment system should also evolve accordingly. We can all observe the intense development of this area in our country, including various payment technologies, mobile banking, and remote services. A digital ruble is yet another step in this direction. How feasible is it to launch such a project in the near future? It is totally realistic, but we should assess the benefits we can see with the existing risks. These risks do exist, and we described them in our consultation paper as well. We will assess this balance of existing risks and benefits. After the discussion of the consultation paper is completed, we will collect the feedback until the end of the year and, then, process it. If we decide that the launch of a digital ruble is feasible, we will then devise a full-fledged concept. After that, we believe it necessary to carry out the piloting with the engagement of a limited number of users, to polish everything and to understand properly how it all works. In our opinion, such piloting may be possible approximately by the end of next year. As we receive the results of this testing, we will proceed further. The key task at the moment is to assess the benefits and risks of such a decision.

QUESTION from Fomag:

Over all previous crisis periods, we observed such a trend as the devaluation of the ruble, always followed by high inflation. Currently there is no high inflation, although the ruble is weakening. Does this mean that we are coping with this crisis quite well, or is it still too early to get complacent?


Talking of a situation when exchange rate movements do not translate immediately into prices, this is really so. This is the advantage of the inflation targeting regime and a floating exchange rate. From this perspective, this is really so, but exchange rate movements are not the only parameter of a crisis situation and, actually, not the main one either. The key indicator proving that we have got through this period will be the recovery of our economy, employment and incomes and the achievement of a sustainable development path.


Has the Bank of Russia assessed the amount of cash it would be possible to remove from circulation when a digital ruble is used? How much will the Central Bank save on issuing a digital ruble instead of cash? How are you going to promote the use of a digital ruble?


Firstly, there is no such a task as to replace any type of money. Actually, this will be the third form of money, along with the currently existing cash and non-cash forms. This will be for individuals and businesses to choose which form of the ruble they prefer to use in particular cases. Our task is to ensure the easy conversion of one type of the ruble into another. Therefore, we are certainly not aiming to save on the issue of money. I think that even if we decide to introduce a digital ruble, its spread will be gradual. I think that people and companies will be watching and examining what a digital ruble is and what can be done using it. Of course, financial literacy programmes are very important in this regard for people to be able to use a digital ruble confidently.

QUESTION from TASS Agency:

According to the report on a digital ruble, digital currency will have a sort of unique code, similarly to cash money having series and numbers. Does this mean that the Central Bank will be able to trace the entire path of a digital ruble and track all transactions with it? If so, who will have access to this information? In this context, is it possible to talk of a certain loss of anonymity in transactions with a digital ruble which is typical of cash transactions?


This is true, a digital ruble is supposed to have a unique code, which will enhance the transparency of such transactions. However, the anonymity and confidentiality should not be confused in any way. Of course, there will be no anonymity intrinsic to cash. As to confidentiality, it is expected to be enhanced. The Bank of Russia will maintain a register of the central bank digital currency. As to whether such operations will be seen or not by anyone else, this will depend on which functional model of a digital ruble will be chosen. As you know, our consultation paper describes several models with a greater and lesser extent of commercial banks’ involvement. By the way, the currently existing forms of transactions with the non-cash ruble also enable commercial banks to see the settlements they carry out. In this case, the situation will change somewhat, but we certainly hold that a digital ruble requires the highest confidence and privacy possible, which will be the key task if we decide to introduce a digital ruble.

QUESTION from Region 29 TV channel, Arkhangelsk:

It would be interesting to hear the Central Bank’s opinion about whether several key rate reductions during the year imply that money should not be deposited with banks? This may be a narrow-minded question, but many people now tend to think that it would probably be better to hoard money at home rather than deposit their funds with banks.


In our opinion, bank deposits remain attractive as a way to save money. This is true, deposit rates have slightly decreased, just as interest rates on loans, but they are still higher than inflation. In other words, funds deposited with banks do not only preserve their purchasing power, but also generate moderate returns. Of course, people prefer to earn more, but hoarding cash at home would imply no returns. On the contrary, this money will be losing its purchasing power due to inflation. However, we can now see that people are becoming more interested in earning higher returns, and many of them are entering financial markets, stock markets. Yet, I would like to stress once again that returns depend on the level of risk. Banks really offer a very low level of risk owing to the efficient deposit insurance system. When a person opts for the stock market, seeking higher returns, it is essential to analyse particular products and inherent risks. There are now a lot of complex products difficult for understanding. When one is offered high returns, a person should make efforts in order to properly understand a particular instrument, so as to avoid any unpleasant situations in future. Nonetheless, the stock market offers people the opportunity to earn money and invest their savings in various ways. As the Central Bank, we are pursuing the policy protecting the rights of investors, especially of non-qualified ones, in the financial market. We believe that this task will become increasingly important.

QUESTION from Interfax:

You have mentioned the resurgence of the pandemic, and I have a question in this regard: does the Bank of Russia consider the possibility to reintroduce a part of regulatory relaxations for banks? Can you suspend the termination of some of these relaxations, or return others of them, for instance, those that expired on 30 September 2020?

My second question is as follows. Within the draft budget for the next three years, the Central Bank will not receive 200 billion rubles from the sale of Sberbank. These funds are correlated with the sale of banks undergoing resolution. Could you please clarify whether this is a gesture of goodwill on the part of the Bank of Russia or you do not expect Bank Otkritie and Asian-Pacific Bank to be sold in the next three years?


As regards the second question, we are planning to sell Otkritie and Asian-Pacific Bank as soon as possible and are carrying out relevant preparations. No, this is not related to them. Indeed, we took into account the challenging circumstances businesses and individuals are experiencing and the need in funds to finance support programmes.

As to the first question concerning the regulatory easing, we are constantly monitoring the situation in banks, including how they grant and restructure loans, in order to ensure that our regulation incentivises banks to continue lending and loan restructuring. This was the aim of the regulatory easing, which also enabled banks to adjust to the drastic changes. As you know, we carried out such analysis in August and made the decision to extend many regulatory relaxations, especially those related to loan restructuring for households and small businesses. Moreover, we have also extended the privileges enabling banks to continue loan restructuring until the end of the year and to create provisions for loans to large corporates until 1 April and to small and medium-sized enterprises and households — until 1 July. This was one of the most requested measures. Of course, we will continue to monitor how the situation evolves.

Other measures were less requested. Currently, we do not observe any circumstances that would make us reintroduce them.

However, I should reiterate that the situation is changing. We will certainly continue our analysis and make prompt decisions, if needed.

QUESTION from Izvestia:

The comment implies that public debt may increase. Why does not the Bank of Russia itself purchase federal government bonds from the Ministry of Finance, engaging banks as intermediaries instead and giving them the opportunity to earn and invest these additional earnings in foreign currency, for instance? Does the Central Bank have any plans to purchase federal government bonds itself from the Ministry of Finance?


No, we are not planning to purchase government bonds from the Ministry of Finance. Nor do we provide any special funding to banks for them to purchase these bonds. We supply this liquidity to ensure that banks are capable to improve liquidity management in the conditions I have been talking about, when the operations of the Ministry of Finance are very uneven in terms of both borrowing and expenditures. In our opinion, these operations are totally market-based, and this was also critical for us. As you can see, we add a premium to the key rate when placing these funds. The Ministry of Finance also does all this within market operations. On top of this, we do see that banks are interested in buying highly liquid assets. As you remember, there was a long period when we were experiencing a deficit of highly liquid assets. In order to ensure compliance with required ratios, the Central Bank even proposed a specialised instrument, namely irrevocable credit lines. This situation was associated with the fact that Russia’s public debt is not very large — to put it straight, our public debt is small. Currently, it still remains low, although it increased slightly. Banks are interested in expanding the portion of highly liquid assets in their portfolios. By the way, the share of highly liquid assets in the form of government securities held by our banks is much smaller than in many other countries.

QUESTION from Bloomberg:

I have another question concerning a digital ruble. Could you please share your personal opinion about the pros and cons of this idea? I think that you should definitely have your own view.

And another small question regarding the recent arrest of one of Bank TRUST’s executives. Could you expect this in any way? How do you see this situation? Will it be necessary to hire another specialist to work with troubled assets in this bank?


As regards a digital ruble, the assessment of this project is a rather complex balance of benefits and risks. Easy settlements and the convenient electronic form are definite advantages. The possibility to make payments offline may become another significant benefit. It will be possible to carry out such transactions even without access to the Internet.

Digital currency can easily build into the functioning of the economy, for instance with smart contracts and so on, that is, it may facilitate the functioning of the digital economy, in particular, including operations with digital financial assets. Russia has recently adopted the law on digital financial assets. I believe that these are important benefits. There is demand in the market, and we can observe the development of various payment systems, including the systems of instant payments, as I have already said. We can see that the Faster Payments System is highly requested. People and businesses need fast, convenient and almost instant settlements.

Moreover, a digital ruble is the central bank currency. Therefore, the stability of this money is the responsibility of the Bank of Russia. This is certainly an advantage.

Cons associated with information security are apparently the most important ones. A challenge for us today, rather than a con, is how to build the technology for making offline payments with a digital ruble. It is more or less clear how to carry out online settlements depending on a particular model, while for offline payments we will need to discuss and develop special technologies. Currently, there are no fully elaborated solutions. The potential influence of a digital ruble on the financial sector in general is certainly not a risk, but rather a topic for analysis and understanding. Nonetheless, I believe that any risks are minor here, since we have all necessary tools, as well as our communication with banks regarding liquidity management in these conditions, and we comprehend how this will function.

However, we would like to discuss it with those who will use a digital ruble. There may be some aspects that market participants can suggest and focus on. We will be discussing this topic.

As regards Khabarov, this was definitely unexpected. Of course, it is essential for us that Bank TRUST properly fulfils its functions related to the work with and recovery of troubled assets. Although this case is not associated with the operation of TRUST, we will need to think over its management team and make a decision on how to strengthen it. TRUST is headed by Alexander Sokolov, and I think this will be for him to decide how to organise the work in this situation.

QUESTION from ulpravda.ru, Ulyanovsk:

What factors impact the development of the macroeconomic forecast in Russia and how the current situation with the pandemic has affected forecast indicators?


Indeed, there are a whole lot of factors influencing the forecast in our country. However, there have been certain changes in this regard in recent years. Previously, the oil price used to be one of the key factors, while in recent years Russia has managed to reduce the dependence of the country’s development, economic and budget performance on the oil price. It has become possible to decrease this dependence owing to the fiscal rule, the inflation targeting regime, a floating exchange rate, as well as, by the way, reserves and safety cushions, etc.

Therefore, the oil price has become less important in forecasting. It does impact forecasting, but to a lesser extent than before. Overall, the external environment certainly influences our forecast. Russia is a country that exports and imports a lot. Our country is involved in all global chains. Accordingly, the situation in the world economy and global financial markets is one of the key factors, and we certainly take this into account. However, the main thing is conditions inside the country and how the situation evolves in the economy and industrial production, with employment and unemployment, and inflation. All these aspects influence how we estimate the future, prepare the forecast, and analyse various trends. Our colleagues and specialists apply multiple models. Of course, we now have to prepare our forecast in the situation when there is so much uncertainty. There may emerge absolutely unpredictable events, such as the coronavirus pandemic. Nobody could expect this, and it has dramatically affected not only our forecast, but also the overall situation in the world. Indeed, such factors may arise. What does this imply, even beyond the forecast? When there is so much uncertainty and there may emerge unexpected factors, it is crucial for all financial institutions and companies to remain sustainable and be secured in case any unforeseen circumstances arise, to have necessary safety cushions, and so on. I believe that this is absolutely essential in the current situation of uncertainty.

QUESTION from Reuters:

As we know, the Russian government has acquired Aeroflot shares using the National Wealth Fund’s resources. Is the Central Bank also going to convert this foreign currency in the market? How will the daily amounts of foreign currency increase in this connection?


This is true, we are currently carrying out foreign exchange operations related to the NWF’s operations. These are not regular operations. We have regular ones when we actually fulfil the fiscal rule, but we also have operations that are not regular. As we stated earlier, a key principle of our policy is to smooth out the impact on the foreign exchange market. At the same time, we want our policy to be transparent in this regard. In normal conditions, we are going to use the following approach which is rather simple. We have discussed it because the acquisition of Aeroflot shares by the NWF is not the first transaction already. We are going to mirror all operations in the domestic foreign exchange market, in addition to regular operations, in the amount of no more than 4 billion rubles a day.

As you remember, we are already carrying out sales following the offset of the Sberbank-related operations and other operations. We have completed this offset. Now, we are conducting additional operations to sell foreign currency in the amount of 2.9 billion rubles. Accordingly, within this general approach, after we determine a certain threshold amount (which will not affect the foreign exchange market, in our opinion), we will increase the sales to 4 billion rubles as soon as Monday, that is, this will be an additional amount to the earlier sales. We will present the updated schedule for such additional sales in our press release to be published tonight.

QUESTION from Forbes:

Many analysts consider that the upcoming US elections may seriously affect Russia’s financial system. Do you agree with this opinion? For instance, Deutsche Bank wrote that after November it would consider the possibility to return long ruble positions. Do you agree with the opinion that the US elections and sanction risks will become rather serious contributors?

I would also like to ask a clarifying question. The NAFI Research Centre recently released a study saying that the level of confidence in the banking system and Russian banks dropped to its five-year low? How does the Bank of Russia assess such data and is it going to take any measures in order to increase this confidence?


As regards the elections and sanction risks, the US elections may really be a source of volatility in global markets, but this is not necessarily so. This is not predetermined. Of course, we do factor in this risk. We certainly take this into account in our forecast.

As to potential sanctions, we have already got used to live in the conditions of permanent sanction threats and risks. Therefore, there is nothing new in this regard. The main thing is to enhance the resilience of our financial system and the economy to such potential adverse consequences and effects, which we are already doing.

As to foreign investors, we can see that generally foreign investors estimate risks: there are periods when investors are ready to invest in higher-risk assets, including in emerging markets, and there are periods when they prefer to invest in more reliable assets. Such changes may occur. They are certainly influenced by specific Russian factors. Nonetheless, we believe that the major factor that affected confidence was the overall uncertainty during the first months of the quarantine, but it is recovering now gradually. Therefore, we do not anticipate any serious changes in this regard.

The main thing we can observe is that non-residents are not exiting the market now, at least they were not recently. In particular, their OFZ holdings remain sufficiently stable, approximating 3 trillion rubles.

QUESTION from TASS Agency:

Does the Bank of Russia see any preconditions for easing the regulation in the deposit market amid low interest rates and the termination of resolution measures in this sector?


Firstly, it was this year in the conditions of the pandemic when we decided to reduce the rates of contributions to the Deposit Insurance Agency. To a certain extent, this influences the unconditional value of deposits. Moreover, we reduced not only the base rate, but also the increased rate and the increased additional rate of contributions, and will be monitoring the situation further.

As regards other regulation that may impact rates, you probably mean required reserve funds. We are not going to introduce any changes in this area. The increased rate for required reserve funds in foreign currency is our targeted policy to reduce the share of foreign currency in the economy. We can see that it has been efficient, and therefore, we are not going to change it.

As to ruble rates, they are rather moderate, specifically 4.75% for all banks, and, as far as I remember, 1% for banks with a basic licence. This is an essential instrument to promote steady demand among banks for liquidity in correspondent accounts. This is a key element for pursuing monetary policy. Moreover, when extraordinary events emerge, this also enables us to promptly inject liquidity into the banking system, especially considering its uneven distribution.

Therefore, we believe that the base rate of 4.75% in rubles is quite moderate and neutral and there are no preconditions for cutting it.

Thank you all for your attention. I wish you all good health!