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Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 28 October 2022

28 October 2022

Good afternoon,

Today, the Bank of Russia has decided to keep the key rate at 7.50% per annum.

The major trends observed over recent months remain. The current growth rates of consumer prices are still decreased, and annual inflation is decelerating. The economy continues to adapt to the current changes. However, there are new factors that might have a proinflationary effect in the medium term. In the first place, these are escalating geopolitical tensions, partial mobilisation, and a worsening situation in the world economy. Considering this, our decision to keep the key rate unchanged appears to be most balanced.

I would now dwell on the reasons behind this decision.

Firstly, inflationary pressure currently remains decreased.

A slight acceleration of price growth in September versus August was primarily caused by one-off factors, namely higher rates in auto insurance and mobile communication. Net of them, pressure on prices will be below 4% in annualised terms. We still observe a downward adjustment of prices for consumer goods that became much more expensive in spring. These are construction materials, furniture, electronics, and some food products. Nevertheless, price growth is still gradually accelerating overall, compared to very low figures in May, June, and July.

Monthly price growth is expected to be notably higher in December, largely due to the pass-through of the indexation of utility tariffs to December. This will increase annual inflation by about 0.5 percentage points this year.

Companies’ price expectations continued to go up. Households’ inflation expectations remain elevated. However, we still do not observe any rise in consumer activity. Saving behaviour might be explained by elevated uncertainty. Besides, consumers might still continue to adjust to the changed range of goods.

A new factor influencing price trends is partial mobilisation. In the coming months, it will have a disinflationary effect because of lower consumer demand. Nonetheless, later on, it might start to have a proinflationary impact due to changes in the structure of the labour market and a shortage of some specialists. It is now difficult to assess all economic consequences of the shift in the structure of employment. They will manifest themselves gradually through the adjustment in wages and a possible intensification of the transfer of labour force across industries and regions.

The inflation forecast for this year has been adjusted to 12.0–13.0%, whereas that for the next year remains unchanged, namely 5.0–7.0%. Inflation will return to its target of close to 4% in 2024.

Secondly, as the economy has been adapting to the external restrictions more quickly, the decline in GDP in 2022 will be less significant than assumed in the middle of the year.

This is associated with a more positive situation in the third quarter owing to industrial production and the agricultural sector expecting a record-high harvest this year. Trends in agriculture are covered separately in the October report Regional Economy box. Considering this, we have improved our GDP forecast for this year and believe that the contraction of the economy will be 3.0–3.5%. Nevertheless, according to recent data, economic activity has started to decline again in September after its stabilisation in summer. This might be caused by weaker consumer demand and worse conditions for Russian exports, amongst other reasons.

Heterogeneity across industries and regions remains. After the suspension of operation in spring, the domestic automobile industry has started to recover. The output of medicines and some types of agricultural machinery is expanding at a double-digit pace. There are considerable changes happening in transportation. International cargo traffic has been largely redirected to Far Eastern seaports, with their share in sea container transportation growing from 40% to 70%. The carrying capacity of the railways leading to these seaports has become of paramount importance. Their overload might hinder exports, on the one hand, and restrain the increase in imports from Asia, on the other hand. There are some coal producers, oil refineries, and petrochemical enterprises, for which the redirection of supplies to the East remains a serious logistics problem. Difficulties with sales are forcing individual companies to reduce their output.

In our updated forecast, we have kept Urals crude prices in 2023–2025 unchanged at the level of 70, 60 and 55 US dollars per barrel, respectively. On the one hand, this estimate takes into account the worsened forecast for the world economy, including higher risk of a recession. As a result, global demand for commodities, including Russian oil, might contract. On the other hand, the OPEC+ countries have taken measures to cut the oil production quotas. We believe that these factors are offsetting each other.

The recovery growth of the economy next year will start slightly later than assumed in July. The economy will reach the bottom of the decline in the middle of next year. Demand from the public sector will continue to support economic activity. The forecast of GDP for the next year has remained unchanged: it will shrink by 1.0–4.0% and resume an upward trend in the fourth quarter.

I would like to say a few words about the balance of payments. We have slightly raised the forecast of exports and imports for this year. The forecast of the current account surplus has increased by 10 billion to 253 billion US dollars. Further on over the forecast horizon, imports will be bouncing back as companies find new suppliers and arrange mechanisms of settlements and logistics, whereas exports may be contracting due to the external restrictions. As a result, the current account surplus will be decreasing as well. The path of this decline is approximately in line with our July forecast.

Thirdly, monetary conditions have remained neutral overall. However, they have slightly toughened after the September meeting, despite the key rate reduction.

The main reason was intensifying geopolitical tensions. As a result, yields on federal government bonds, especially long-term ones, have edged up. Besides, banks have raised their deposit rates in response to the outflow of cash. As to credit rates, they have stopped declining. Concurrently, banks have increased their requirements for borrowers. This is evident from a lower share of approved loan applications. Ultimately, there are signs of a slowdown in lending in October.

Nonetheless, credit activity is still high now in both the retail and corporate segments. The growth of corporate loans in rubles is partly associated with the replacement of foreign currency loans and external financing.

Considering the current trends, we have raised our forecast for lending to the economy to 9.0–12.0%. This rate will remain nearly the same in the next few years.

I will now speak on the risks that might cause a deviation from the baseline forecast. Proinflationary risks have risen over the medium-term horizon.

As regards external conditions, the situation in the world economy is deteriorating. Many countries were pursuing accommodative monetary policy for a long period, thus creating an overhang of cheap credit in the economy. Such policy has caused imbalances that are inevitable in this case, exacerbating risks to financial stability in global markets. Responding to high inflation, many countries have raised their policy rates abruptly, which also has negative implications as this will hinder the growth of the world economy and increase debt servicing costs. This is aggravated by the effects of the fragmentation in global markets and the escalation of geopolitical tensions. A further intensification of the crisis processes worldwide and the expansion of the sanctions imply a shift towards a more considerable shrinkage in Russian exports and a potential weakening of the ruble, which might cause proinflationary effects.

As regards internal conditions, important risks for us still include further changes in inflation expectations and a possible impact of their elevated level on households’ saving behaviour model.

Moreover, proinflationary risks associated with the labour market have risen. An increase in staff shortages is strengthening companies’ competition for employees and pushing up wages that might grow faster than labour productivity.

A considerable group of risks is related to supply-side factors. Enterprises are gradually tackling the problems with maintaining current operations, but investments in the development might be hampered by both overall uncertainty and difficulties with equipment purchases and deliveries. This means that supply might be recovering more slowly in the future.

There are three groups of factors that might have disinflationary effects. First of all, households might continue to prefer savings. Second, a record-high harvest expected in agriculture this year might have an impact on prices in the domestic market amid persistent difficulties with exports. Third, this is a faster rebound in imports of consumer and intermediate goods. Generally, disinflationary factors are weaker than proinflationary ones over the forecast horizon.

Our forecast relies on the already published parameters of the draft budget for the next three years. The predictability of fiscal policy and a consistent reduction in the structural budget deficit over the forecast horizon are essential assumptions behind the monetary policy path presented in the forecast.

Winding up, I would like to comment on our future decisions. Obviously, the Russian economy is experiencing a deep transformation. Consumers are changing their behaviour strategies, and businesses are adapting to the new challenges. The events and risks that have occurred over the past month might have mixed effects on the economy and prices. As we receive data on the economic development in these conditions, we will additionally adjust our estimates of those effects and their impact on the forecast. Our decisions will aim to return inflation to the 4% target in 2024.

Thank you for attention.

Q&A for the Media

QUESTION from Interfax:

A traditional question: what options were on the table today for the key rate, did the Bank of Russia consider raising and lowering it?

You mentioned in September that there was less room for further key rate cuts. Can we already say that it has been exhausted? Is the slight deterioration in monetary conditions prompting you to stick to a slightly tighter monetary policy?


This time, there was a broad agreement that the key rate should not be changed.

In terms of our next steps, we believe that monetary policy has now reached a state of neutrality, and therefore we have sent a neutral signal.

What exactly does this mean? This means that the further key rate path, the further monetary policy stance will depend on incoming data on the economy, inflation, and inflation expectations. And, depending on which factors prevail, the key rate may remain unchanged, move up, or move down. This implies that we give a neutral signal.


Your speech on monetary policy was very detailed in the press release, so I will allow myself questions that are not about monetary policy.

In particular, at what stage is the struggle for the frozen reserves? I am talking about the claims.

And another question. The media report about a ‘bubble’ in the mortgage market. Could you please comment on this?


Concerning the work on the frozen assets, I have stated numerous times that it is a difficult task. Preparatory work is underway, but it is probably premature to make any further comments now.

Concerning the mortgage, it is an important segment. We can see that, beginning from 2020, the growth in housing prices continues to outpace the growth in households’ nominal incomes.

And the second important trend. In Russia, the dynamics of housing prices in the primary market outpaced the dynamics in the secondary market, and this gap has widened. We can see that this could be an indirect precursor to overheating in the housing market.

We were particularly concerned about the spread of subsidised mortgages from developers, which could increase the risks of a ‘bubble’ in the mortgage market, and we talked about it quite loudly and a lot.

Now we see that the mortgage market has somewhat cooled amid uncertainty.

The number of mortgage loan applications is decreasing, while the number of houses available in the secondary market and at discounted prices is increasing. This may lead to a shift in demand from the primary to the secondary market, and may help keep prices in check.

We will surely monitor these issues, but we believe that, to avoid ‘bubbles’ and overheating, it is important to develop targeted support programmes instead of large-scale subsidised ones that could create imbalances and lead not to more affordable housing for people, but instead simply to higher prices.


The first question will be about the Bank Otkritie deal, which is being prepared now.

According to the appraiser, the Otkritie group is worth 359–386 billion rubles. However, the head of VTB Andrey Kostin said that the price issue would still be discussed and other issues were being coordinated with the Bank of Russia.

In your opinion, is the Bank of Russia ready to sell Otkritie below the price range indicated by the appraiser, and in general, is the question of the price of Otkritie debatable?

And I will ask the second question right away. Based on the executive order signed on 15 October, the Bank of Russia has the power to issue permits for the export of foreign currency over 10,000 US dollars.

Whom may such permits be issued to, for what purposes, and has anyone already applied for them?


As for Otkritie, the process of appraisal is nearing its completion, but Fund of Banking Sector Consolidation Asset Management Company (FBSC AMC Ltd.) has not yet received a formal appraisal report, and even if it does, we do not comment on the appraisal results.

We will certainly discuss the price with the buyer. These negotiations will continue, and in any case, we expect to close this deal by the end of the year. These discussions will likely be held in the near future based on the appraiser’s report.

And secondly, with regard to our powers granted by the executive order to issue permits for the export of foreign currency in excess of 10,000 US dollars.

Yes, we now have such powers. But so far, there is no way to raise the limits on cash currency exports by Russian residents, as access to foreign cash is restricted. Non-cash payments are more active as payments for Russian export goods.

We will continue to monitor the situation.

QUESTION from Invest Future project:

I have two questions.

The first one is the following. There is now good news for Russian investors that a part of their assets, around 10%, will be released.

I would like to know if any, possibly, reciprocal measures have been devised to unblock and sell assets for non-residents from unfriendly countries? Maybe equal volumes, or something that will look like a reciprocal move.

My second question concerns what you have already mentioned today. These are geopolitical risks and their impact on lending rates.

How does the Bank of Russia now evaluate the effect of lowering the key rate to stimulate the economy, while banks are increasing their requirements for borrowers, maintaining fairly high interest rates, because they are simply afraid of non-payment on these loans?


As for the first question, indeed, there is such information, and private financial institutions are working to unblock the frozen assets of our retail investors — by trying to obtain licences, through the courts, and by way of negotiation.

But so far this has not happened. From the standpoint of response measures, they will depend on the situation.

Regarding the impact of geopolitical risks on lending rates, and in general, on lending activity, indeed, despite the fact that we lowered the key rate in September, there has been an increase in lending rates.

But this reflects an increase in the risk premium. With our key rate, we influence short-term interest rates, money market rates, and only then the interest rates for specific borrowers, market rates (they are not administered). They take into account these risks, the overall level of risk in the economy, but also the risks of particular borrowers, the level of their income, cash flows, debts, and so on.

And of course, now banks have revised upwards this level of market risks. This can already be seen in a certain slowdown in lending.

We will look at how this affects the inflation forecast and, if necessary, adjust our monetary policy.

QUESTION  from RIA Novosti:

According to the Bank of Russia, are additional measures needed to balance exports and imports, and what measures might be taken?

Did the Bank of Russia assess the potential effect on Russia’s GDP from the latest OPEC+ cuts and the European embargo on Russian oil?


Concerning, as you say, balancing exports and imports, now the change in the flow of exports and imports depends, first of all, on our refocusing on other markets, including on the elimination of logistical problems, existing infrastructure bottlenecks, and on the organisation of the settlement system.

This is probably the main thing that affects the flows of exports and imports amid external restrictions.

As for the financial component, we continue to believe that a floating exchange rate is the best way to balance the interests of exporters and importers in these conditions.

As for the potential effect of the embargo, the OPEC+ decision, and the price cap, I think that few people can imagine the possible consequences, in total.

However, as these consequences can be very diverse, it is important for us to remain conservative in our oil forecast.

If you look at our forecast, we were conservative in July and we are now. We kept our estimate of oil prices going forward, as we did in July, because there were two conflicting factors.

On the one hand, there are the actions of OPEC +, on the other hand, there is a possibility of a decrease in demand for Russian energy commodities, both under the influence of a slowdown in global economic growth and of various export restrictions, so it is very important for us to remain conservative here.

Mr Zabotkin, do you have anything to add?


Regarding the impact of sanctions on GDP.

All announced sanctions have been factored into the forecast, and the impact is there. So, according to the assumptions of the forecast, the next year’s export quantities of oil and petroleum products will be slightly lower than the actual quantities as of the end of 2022.

QUESTION from Vladivostok newspaper:

To date, the level of inflation has virtually no correlation with the key rate. Each indicator, in fact, has a life of its own.

What prevents more dynamic key rate cuts?


In answering the previous question, I have already started talking about the role of our key rate, that the key rate, after all, mainly influences short-term interest rates, while other factors impact market rates: the risk premium, and so on and so forth.

Nevertheless, the key rate is a very effective tool for controlling inflation.

I can give you an example. In February this year, when inflation and inflation expectations soared, it was the key rate increase that became the main factor helping restrain inflation and restore financial stability.

You ask why we cannot lower the key rate more dynamically. But, essentially, we reduced it quite dynamically, because in February it was 20%, and now it is 7.5%, which is one percentage point lower than at the beginning of the year and two percentage points lower than in February. Therefore, we are reducing the key rate quite actively, but its further movements will depend on what happens in the economy, with inflation processes, and the factor of inflation expectations is very important.

QUESTION from Russia 24 TV channel:

My question is about the development of joint payment systems with Turkey and Iran, especially considering the problems that arose with our Mir cards in these countries.

How is it going now, at what stage is their development?

And probably the most important question: when can such a system become fully functional?


Indeed, we have difficulties under the influence of sanctions, our partners are concerned about secondary sanctions, they will certainly be affected if these payment instruments are used.

But we are working with all partners, our partnership is built differently with each country, and each country is unique. We probably will not comment on the details here, but we are trying to create various alternative possibilities so that Russians, who often go on tours and business trips, could use modern methods of payment.

QUESTION from Reuters:

I would like to ask two sets of questions, if I may.

The first is about the banking sector. Today it has become known that Citibank is selling its portfolio of consumer loans to BANK URALSIB. At the same time, Citibank and 44 other banks with foreign participation are on the list that was published this week. A special permit will be required to allow transactions with the equity capital of these banks.

My questions are as follows. What will be the criteria for obtaining a permit for foreign banks and foreign shareholders to sell their subsidiaries?

Does the example of Citibank selling a part of its portfolio mean that it is possible to sell assets without such permit, but simply dividing them into parts?

And the third question here, if I may. Do you see the risk of bailing out some of the banks on this list simply because the parent banks will stop financing them?

One more question, about a different thing. You mentioned that the mobilisation for the SMO (special military operation) can have a proinflationary effect, including due to the labour force and so on. Do you have a preliminary estimate, in basis points, of how much the mobilisation might add to inflation?


As for the operation of Russian subsidiaries of foreign banks, in Russia, we treat them as Russian banks, and all regulation in general and supervisory practice are applied in exactly the same way. Indeed, transactions involving the assets of some companies on the list require a special permit. These criteria have not yet been established. The executive order is being worked on and it is difficult to talk about it so far. Apparently, the full range of factors will be considered in this situation.

I do not see any potential need for bailout yet. We do not see any cases where this would be required in the short term, because the banking system as a whole is stable.

As for the possibility of selling assets, the executive order applies only to transactions with shares.

Regarding the impact of the partial mobilisation and possible proinflationary factors, and their assessment, in fact, I have already said at the beginning that it is quite difficult to assess them. We will be guided by the incoming information. Basically, we can now say that this is a disinflationary effect in the short run and a proinflationary effect in the long run. But maybe Mr Zabotkin will add something here.


It is really hard to add anything here. In fact, the inflation forecast for this year speaks for itself. It is, so to say, slightly shifted up and narrowed. This upward shift is mainly due to the rescheduling of the tariff indexation from July next year to December. That is, all other factors seem to balance out.

And for the next year, if you see, our inflation forecast has not changed either, so the base case is that the cumulative impact of all the changes that have occurred since July on the inflation path tends to be neutral.

But, of course, this is currently an expert judgment rather than a clear econometric extrapolation of the past experience. In this sense, at all future meetings, we will update these estimates based on incoming data.

QUESTION from Bloomberg agency:

I have two questions. One of them is a clarifying question. Actually, colleagues have already asked about balancing exports and imports.

The media report that government agencies were discussing the option of restricting exports, as imports could not increase rapidly. Does the Bank of Russia actually participate in these discussions? If so, what do you think of this idea in general? And generally, can such a restriction on commodity exports work? That is, have you looked at this model?

And the second question. Speaking of the new regions, how is the integration of the new regions into the regional structure of the Bank of Russia going? Have the representatives of the new territories already participated in the discussion of key rate decisions, like other regions?


As regards balancing exports and imports, I have no information about and have not participated in any discussions that would concern any administrative restrictions on exports precisely in order to balance exports and imports. In my opinion, it is unreasonable to do so. Indeed, what we have to consider in circumstances where our exports exceed our imports and the options for building up reserve assets are limited is that no additional measures should be taken to stimulate exports artificially. This is probably the only way to answer this question.

QUESTION from ProFinansy project:

Back to the mortgage issue. At the last press conference we talked about mortgages at 0.1%, and now there is a new phenomenon in the mortgage market. This is a mortgage with a monthly payment of 1 ruble until the facility is commissioned. And you can use this option for up to 3 years, until the facility is commissioned. In addition, no interest is charged on the principal during this period either. This is something very new in the mortgage market.

I would like to ask, what is your opinion about such mortgage programmes, because they have caused an incredible stir.


Indeed, this is a new product. We are now carefully analysing all the consequences of tranche mortgages, as we call them. It is not widespread yet, but as we can see, there may be risks here.

First, this could be a risk for developers. Why? Because with such tranche mortgages, smaller amounts will be credited to the escrow account — only initial payments and this very symbolic first tranche. The escrow account will fill up more slowly than with a conventional mortgage. But we see that the filling of escrow accounts allows banks to reduce interest rates on loans to developers because they have this security. And we have seen that these rates on loans to developers under this programme are well below, for example, the average lending rates to the corporate sector in general. So this can increase the interest rate on loans for project financing.

Second, it can increase the demand for housing as an investment. It can actually be attractive, even for speculative purposes, so to speak: anticipating a rise in housing prices, individuals and companies could invest in housing with the intention of reselling it later. And investors may face a problem of debt overhang. This may contribute to higher housing prices.

That is how growth in housing sales for investment purposes accelerates. It will further widen the gap between the price dynamics in the primary and secondary markets. We can already see it happening. And this gap between the primary and secondary markets can create problems for servicing mortgages, because when people have to sell their homes that are mortgaged, the price in the secondary market will be very different from the price in the primary housing market.

Of course, there is also a risk of misselling here, the so-called unfair selling, when people will naturally react to the low cost of servicing a loan during the initial period, until the housing is commissioned, and will not be fully aware of the future cost of servicing such a loan. We see these risks, but will continue to analyse how this will evolve and, if necessary, make appropriate decisions in the regulatory space.

QUESTION from Financial One:

My first question is as follows. Today, many experts discuss the benefit of the 1940s experience in solving problems using the mobilisation model of the economy. How reasonable are these experts’ opinions? Is it worth switching to such a model now? And is it possible at all?

My second question is about private investors who are currently divided into two groups. One group believes that now is the time to sell as long as such opportunity exists. The exchange has not been closed, and there is still a chance to get back some money. But another group of investors says: look how cheap everything has become, we need to buy shares of commodity companies, because they have never been so cheap. Which of these groups of investors is right?


As for the first question, indeed, our economy is facing new challenges. I would like to emphasise that old challenges are still in place. As a matter of fact, we are at the stage of a profound structural change influenced by many factors. I will not even go into detail. And I strongly believe that such a transformation can only succeed on the basis of a free market economy.

Without a doubt, the state should support these structural changes, remove infrastructure bottlenecks, and so on. This is what the Government is doing now.

However, resources should be reallocated to the most efficient sectors, industries and companies, of course, entirely on market conditions. By the way, we see that, since February, the economy has adapted to the restrictions much better and faster than many expected.

This is primarily because the adjustment mechanisms were market-based. I personally have no doubt about this.

The second question concerns different strategies and approaches of private investors. They always vary. In fact, some investors prefer to buy at the market bottom. There are also those who continue to sell, but I would say that, despite certain restrictions, investment opportunities mainly depend on the actions of unfriendly countries. This concerns both the class of securities and the use of the infrastructure. Restrictions are still in place. But the range of financial instruments remains quite wide, and, of course, private investors can choose where to invest their funds, diversifying, in my opinion, their portfolios.

QUESTION from OTS Gorsite (Novosibirsk):

You have already answered a question about the frozen gold and foreign currency reserves. I would like to continue the topic, because I have heard from experts several times that if these frozen reserves are so difficult to return to the economy, why isn’t the Bank of Russia issuing an equivalent amount in rubles to put them back into the economy?


Let me remind you of this story.

In the past, when the gold and foreign currency reserves were replenished and the Bank of Russia bought foreign currency from exporters, new rubles were put into circulation. That is, at that moment we issued new rubles into circulation. And the fact that these acquired assets were eventually frozen does not affect the fate of the rubles used by the Bank of Russia to pay for the purchased foreign currency. Exporters used these rubles to pay salaries and pay their suppliers, but these rubles have been circulating in the Russian economy for a few years already.

So there is no need to issue rubles in order to return the money to the economy. Rubles have never disappeared from the Russian economy.

QUESTION from NTV TV channel, Business News programme:

My question is about exchange rates — more specifically, about cash exchange rates.

In certain banks, the gap between buying and selling rates is huge. There is an almost twofold difference between the US dollar buying and selling rates which are 40 and 75 rubles, respectively.

Is the Bank of Russia going to do something in this regard? And is the regulator concerned about such a big difference at all?


Indeed, the spreads between foreign cash selling/buying rates have increased. This is because we have faced serious restrictions on the inflow of foreign cash into our country.

Banks set these spreads at their discretion depending on the amount of cash their clients have sold them in foreign currency and the amount of cash banks are willing to sell back.

We are not going to interfere in this, because it allows us to balance the demand for and supply of foreign cash from individuals and businesses.

QUESTION from Frank Media:

I have two questions. In the first half of the year, the banking system was in the red. We remember that its losses totalled 1.5 trillion rubles.

But as for the second half of the year, we have heard from various sources, including the Bank of Russia, that banks have been posting profit for several months, and Russia’s top two state-owned banks have promised us that the banking sector will return to profitability in 2023.

I would like to know if the Bank of Russia will extend its recommendation not to pay dividends to 2023, considering that payouts from Sberbank would definitely be beneficial for the budget.

My second question is about conversion. We see that some broker banks have actually begun a mandatory foreign currency conversion. Could you comment on the Bank of Russia’s position in this regard. What do you actually think about changing conditions for bank clients?

In one of its comments, the Bank of Russia noted that there was nothing wrong in that practice provided that the new fees allowed for it and banks have notified their clients in advance. But the question to you is as follows: when you say ‘in advance’, what period of time do you consider optimal? Because, today, one of the banks has said in its statement that its correspondent bank suspended transfers in US dollars on its correspondent account since 1 November, and its clients had to withdraw their dollars by the close of business on 31 October. This is just one business day, not including the evening this Friday. This is certainly not a notice given ‘in advance’.


As for the banking system, its profitability is in fact recovering. We expect this trend to continue in 2023.

As for the dividend policy, our recommendation not to pay dividends this year was given to those banks which benefit from our regulatory easing, but if they do not use regulatory easing and make a profit, these banks may pay dividends. We will additionally consider whether this recommendation should remain for the future. Perhaps, it will not be as reasonable as this year.

As for the so-called mandatory currency conversion, we still hold that if the conversion is not provided for by agreements, then there should be no mandatory foreign currency conversion into rubles.

People, including bank clients, should have a choice — to keep their funds in foreign currency, accepting risks, paying service fees and so on, or to convert them into rubles.

By the way, we see that people are now quite actively converting foreign currency of the countries which have imposed sanctions into rubles or friendly states’ currencies. But they should always have such a choice.

And you’ve rightly asked the question about including such rules in agreements or introducing general rules to be followed in advance. We will closely monitor this situation so that people, bank clients have enough time to make informed choices.

QUESTION from Interfax:

The first question is about subsidiaries of foreign banks. Several deals have already been announced in addition to BANK URALSIB.

For example, Mercedes has recently declared its plans to sell some of its assets, including Mercedes-Benz Bank Rus, to a Russian investor. Has the Bank of Russia received a request for the purchase of this bank by a Russian investor? Has the Bank of Russia permitted the deal, taking into consideration that the bank is on the list associated with the Russian President’s Executive Order?

Besides, HSBC also said that it was keeping on trying to sell its subsidiary to a Russian investor. What is the legal status of these deals now?

And another question, please. Has the departure of a considerable number of Russian residents after 21 September become a significant macroeconomic factor? Has the Bank of Russia considered any additional restrictions on cross-border money transfers in this regard? 


As for foreign banks’ subsidiaries and foreign banks’ desire to sell them to other investors, I do not have any information now whether such a request has been received regarding the first bank you mentioned.

In any case, we cannot grant such permission except in the manner prescribed by the Executive Order. And all the procedures specified in the Executive Order will be complied with. 

My second question. As for the departure of some Russian residents, we do not consider any additional restrictions on cross-border money transfers in this regard.


Is there any assessment of the demand for loan repayment holidays for the persons mobilised for the SMO, and how well does this mechanism work?

Has the Bank of Russia recorded any complaints about compliance with this law?


We are collecting information and will publish it monthly. We will publish the volumes of restructured loans or loan repayment holidays provided in accordance with the law.

As for the mechanism, we are monitoring how it works. We are also communicating with banks to ensure they show understanding when making decisions on such loan repayment holidays. For example, one of the conditions for the applicants was to obtain a power of attorney. We explained to banks that the power of attorney can be in a simple form. We are also asked some other questions.

Of course, we receive telephone calls and complaints. All in all, our call centres have received about 300 such applications. They also include questions to clear out how this mechanism works. We will certainly respond to every case of a violation of rights and work with banks to make this mechanism as efficient as possible.

QUESTION from Reuters:

Can the reduction in the key rate continue in December or will the pause last longer?


I would ask Mr Zabotkin to answer this question.


I will repeat what Ms Nabiullina has already said in response to one of the first questions. Following today’s meeting, we reached a broad consensus on both the decision to keep the key rate unchanged at 7.5% and the neutral signal. Accordingly, if we had considered a high probability of a key rate cut at our next meetings, we would have been announced this in the press release.

QUESTION from STRBC Tyva (Kyzyl):

There are many payouts now due to the SMO. Will this affect inflation?


We do not expect that this will accelerate inflation in the country in general. Because these payments are the expenditures which have already been budgeted for.

Furthermore, we do not see that households which receive these payments have begun to actively spend them. We just see that the households’ propensity to save has slightly increased. These are rather precautionary savings.

We do not expect these additional payments to have a proinflationary impact until the end of the year. Of course, the situation in different regions may vary, depending on the level of incomes in these regions. We will monitor and analyse it.

QUESTION from Izvestia:

Yesterday, at the Valdai Club, President Putin announced that he had consulted with the Bank of Russia and the Government before the event and could confirm that the peak of economic difficulties had been left behind.

Was this opinion expressed to him by the Bank of Russia? Do you agree that the difficulties have remained in the past? And how can this be proven?


We have to say that there were difficult moments related, first of all, to the adjustment of the economy to the restrictions which were imposed in the spring. We see that this adaptation is progressing quite actively and better than we expected in the spring and summer, but this does not mean that our future tasks will be easy.

We face the toughest challenges of the structural change, and, of course, external pressure remains and can become more intense. We understand all this very well and will have to go through a quite complicated process of the structural transformation of the economy in order to be able to take the path of sustainable development.

QUESTION from the Funny Money project:

We have already had two episodes similar to bank runs when people were withdrawing cash. The first one happened in February, and another one on 21 September.

How does the Bank of Russia assess risks? And will the system withstand, let’s say, the third bank run of this kind?

One more question, if I may. How would you comment on the idea of the Government of using the National Wealth Fund to finance the budget deficit? In other words, with the gold and foreign currency reserves frozen and offsets in the foreign exchange market impossible, using the NWF’s resources is actually an issuance of money. How do you assess the impact of this factor on inflation?


As to the first question, I would not call this a bank run, because a bank run usually happens when people give up on the financial stability of a particular bank. However, these were somewhat different phenomena. Especially in September, people withdrew their money from banks mainly for the purpose of saving, which was triggered by so-called precautionary motives. By the way, funds were withdrawn from banks smoothly and in smaller amounts than it was in February.

In February, the banking system coped with this demand for liquidity. And it has been handling the situation well so far.

First, in addition to the fact that the system has a structural surplus, banks are able to manage liquidity and, if necessary, raise deposit rates. We saw this in February when the increase in deposit rates helped bring money back to the banking system. By the way, the latest data also show that money has begun to return to the banking system.

Additionally, banks always have a safety net, because they may get liquidity from the Bank of Russia against collateral. This collateral is very large now and includes securities worth nine trillion rubles and additional non-marketable assets also for a total of nine trillion rubles.

If need be, banks may always get this liquidity through standard instruments. So there should be no doubt that the system will cope with the outflow of liquidity.

Could you answer the second question, Mr Zabotkin?


In addition to the first question, I’d like to say that the main indicator of the system’s stable operation in the current conditions is that money market rates remain close to the key rate. Our standard operations give the banking system necessary flexibility to manage its liquidity.

As for the question about the NWF, in my opinion, a rather more detailed answer is required. I have to say that fiscal policy has an impact on inflation via its contribution to aggregate demand and money supply growth.

The money supply dynamics, in turn, are influenced by the overall budget deficit. Using the NWF reserves is just one of the methods for financing the budget deficit.

The structural deficit path is therefore important for the inflation forecast, for our macroeconomic forecast, and for our decisions on monetary policy.

And again, as the Governor noted in her speech, we take into consideration the fiscal rules announced by the Government in the form in which they are submitted to the State Duma as the three-year budget. They have already been approved by our parliament in the first reading. Our forecast of the key rate and its path released today takes them into account.

According to the fiscal policy formulated in the budget, inflation will be 5–7% next year and, given the monetary policy pursued, return to 4% in 2024.

The larger the budget deficit (I would like to emphasise once again that this is primarily about the deficit and not about its financing), the larger the budget’s contribution to demand and money supply dynamics.

Another factor that influences demand and money supply and contributes significantly to money supply is credit to the private sector and the economy. This is why for keeping inflation on the same path and returning it to 4% in 2024 with a bigger budget contribution, the impact of credit on the economy should be marginal.

Accordingly, this will require a tighter monetary policy and a higher key rate. But then again, the forecast that we have prepared is fully consistent with the current budget plans devised by the Government.

Thank you for attention.