Economy and financial system continue to adapt to sanctions
The situation in the Russian economy is improving, but a number of vulnerabilities in the non-financial and financial sectors still require attention.
In particular, companies are facing a decline in earnings and rising costs due to the need to enter new markets and substitute foreign equipment.
There is a gradual transition to the use of alternative currencies (mainly the Chinese yuan). However, their hedging capacity is limited, and the cost of liquidity in yuan rises from time to time. For this reason, the Bank of Russia began to carry out yuan FX swaps.
The amount of money transferred by individuals to their bank and brokerage accounts in other countries has grown. This money is mainly used to purchase goods and travel abroad. Some individuals continue to increase their savings with foreign banks, exposing themselves to the risks of limited operations in accounts and with securities, as well as to the risks associated with the financial resilience of foreign banks and brokers. In addition, the outflow of households’ funds to other countries adversely affects the long-term liabilities of Russian credit institutions.
Eventually, interest rate risks of the banking sector increase. Banks limit their investment in federal government bonds and do not restore their liquidity buffers. The recent crisis in the US shows that banks need to carefully manage both interest rate and liquidity risks.
Moreover, there remain traditional vulnerabilities, such as a large percentage of highly indebted individuals and imbalances in the mortgage market. In order to reduce the debt burden for such borrowers, the regulator has tightened macroprudential limits for banks and microfinance organisations. Risky schemes in mortgage lending have also been limited.
More details are available in the new issue of the Financial Stability Review.