Elvira Nabiullina’s speech at Federation Council’s meeting

Good afternoon, senators. Good afternoon, Ms Matvienko.

Thank you for your invitation to speak at this meeting. I would like to talk about our work on developing the financial market. Much of what I am going to speak of is the result of our joint efforts. We are closely collaborating with Nikolai Zhuravlev, Anatoly Artamonov and his committee colleagues. When it comes to talking economics, the financial market is often excluded from consideration or even contrasted with the real economy, which is, of course, incorrect. The financial market can and should largely contribute to both economic development and social stability. However, to do so, it needs to be sound and resilient as well as enjoy the trust of households and businesses. This is exactly what we are working to achieve.

Let me start with what is on everyone’s mind: the key rate, inflation, and economic growth.

Needless to say, the economy functions in an exceptionally unique environment today. All available resources are being utilised, and sanction pressures are continuously intensifying. This will certainly require us to take decisive and, most importantly, well-coordinated measures.

We raised the key rate in both 2023 and 2024. Why? We did this to protect the economy as a whole, Russian households and businesses, as well as the budget, from the threat posed by rising inflation. You know better than me that people are concerned about inflation. This is a social problem, especially for pensioners, large families, and other vulnerable groups. On average, incomes are going up, but there are many people in need who are forced to deprive themselves of basic necessities. High price growth affects these categories in the first place. We must address this problem before it becomes chronic, despite all obstacles, restrictions, and new challenges.

We are frequently asked whether countering inflation comes at too high of a cost to the economy and whether it is time to cut the key rate drastically.

I would like to highlight what I deem important here: bringing inflation down does not conflict with the economic growth objectives or national development goals. Can the economy leap forward if we sacrifice price stability by letting inflation accelerate? Yes, it can, but for a very short period. The economy will not be able to leap like that year after year, whereas inflation will rise incessantly. Such demand-boosting monetary policy is a recipe for stagflation and, in the worst-case scenario, for hyperinflation and a financial crisis. This is evidenced both by Russia’s experience in the 1990s, which, I am sure, no one is willing to relive, and by the experience of other countries.

This would set the economy far back and undo all the gains in the fight against poverty.

As regards the risk of the so-called excessive cooling, or recession, it could only be discussed given a considerable rise in unemployment and a drop in real wages. Currently, neither is happening, with the situation being completely the opposite. Unemployment is at its all-time low, people are secured with jobs, wage growth rates are high, yet inflation is still twice as high as the target.

What does such low unemployment indicate? It indicates that the economy is currently utilising almost all available labour resources. More workers are needed in order to ramp up production, automate production processes, and implement investment projects. If they are nearly nowhere to be found, a low key rate and a surge in lending would only lead to soaring prices for machines, raw materials, and final consumer products and would push up budget expenditures on literally everything.

Regardless of these major constraints, there are still objectives related to import substitution and technological leadership. The Russian Government takes relevant decisions, supports the priority sectors, and works to enhance labour productivity. What can the Bank of Russia do in this situation?

A fundamental requirement is to avoid excessively suppressing demand, while maintaining room for lending growth to let businesses develop and continue investment projects started earlier. You are absolutely right in saying that monetary policy should be balanced. This year, lending has continued to grow. Over the first nine months of 2025, the portfolio of corporate loans increased by ₽5.4 trillion. Yes, this is half the growth seen during the same period in 2024, but you must agree that this is still substantial and this is still growth. For 2025, we expect corporate lending to go up by 10–13%.

Why is it important to avoid an excessive acceleration in lending growth? Lending is effectively money creation and represents the main source of new money in the economy. If lending expands at a moderate pace, it will not lead to the same high level of inflation as we saw last year.

We are sometimes criticised for constraining credit growth through tight regulation of banks, in addition to using the key rate. This is not entirely correct. We have simply phased out those easing measures that were introduced for banks when sanctions were imposed, so they were always intended to be temporary. Therefore, we should return to a normal level of regulation to ensure that banks remain resilient in any scenario. Now, the banking system’s capital buffer above the mandatory minimum is ₽8 trillion. What does this mean? This means that banks are able to build up their loan portfolio by another ₽4 trillion this year and by ₽12 trillion next year, without losing their safety margin. This is exactly what they need capital for – to expand lending. However, this capital does not appear out of thin air. Capital is formed by almost half of banks’ profit as it is their investment in future loans. Consequently, every ₽1 taken out of banks’ profits reduces potential lending to the economy by approximately ₽10.

A more moderate lending expansion, just like limited resources in the economy in general, requires a more rigorous approach to setting priorities. Here, the programme that encourages banks to lend primarily to the projects related to technological sovereignty and structural adaptation of the economy is yielding good results. As you remember, this programme started off very slow, but we now see the number of these projects gradually rising (currently 60). The volume of lending under this programme is also increasing, equalling ₽1 trillion as of today. Total credit lines that banks have opened for such projects have reached ₽3 trillion.

What else can be done at the level of banking regulation? We aim to make concession projects and public-private partnership projects more attractive to banks. This will help regions build roads, bridges, schools, and hospitals, as well as update urban and utility infrastructure.

Recently, businesses have been more active in raising funds through issuing bonds. Today, businesses receive ₽1 raised in bonds for every ₽3 borrowed from banks. So, this is another form of financing. Currently, our common objective is to encourage companies to raise money through equity financing just as actively. There are a lot of growing businesses that would be of interest to investors. Why are there so few offerings? One reason is that companies have an incentive to take out subsidised loans but lack equally strong incentives to enter the stock market.

This is the second year that we have been engaged in a dialogue with the Russian Government, which generally supports our efforts to eliminate this imbalance and ensure that state support is not limited to subsidised loans. To receive a subsidy, a company must raise a loan, whereas we would like this subsidy to also be extended to companies entering the stock market. In this regard, small and medium-sized enterprises demonstrate certain progress, albeit without any global shifts happening. We believe that investors should have a wide range of instruments with various incentives to choose from. For example, the Long-term Savings Programme shows good results. I would like to emphasise that these funding sources are far less inflationary.

For these instruments to be in demand, investors should have trust in them. Trust is built when there are clear rules of the game and nobody breaks them. First of all, this requires full and transparent disclosure of the performance and prospects of companies that investors give their money to. The latter should be confident in receiving returns on their investments, e.g. dividends if the company has promised them. This is what we, together with the Government and market participants, must continue to work on.

Furthermore, there must be no cases where a change in the majority shareholder leads to a violation of the rights of minority shareholders who are our fellow citizens. This is what undermines trust and devalues all efforts most severely.

Now, let me address another important area of the Bank of Russia’s work, that is, payment and financial technology development.

Here, we see tangible results. Suffice to say that over the past five years, since 2020, the percentage of financial services provided online has increased from 63.5% to 88.5%, meaning that Russians receive a large portion of financial services remotely. This is a very high figure by international standards, which proves that we are able to maintain technological leadership despite all external restrictions.

We rely on the national payment infrastructure as all of its components are now in place. I assure you that only a few countries can boast that they have all the components of the national payment infrastructure. This makes our financial system independent, enhances the resilience of the entire economy, and, which is no less important, allows businesses to reduce costs. Equitable infrastructure and a choice of payment and payment acceptance methods create an environment conducive to competition, which is always beneficial for consumers. For example, currently, sellers are more actively using the alternatives to card payments, including the Faster Payments System as it charges lower fees. You remember how we were developing this system, and I would like to thank you for the relevant legislative decisions you made.

The choice of payment instruments will become even wider due to the digital ruble. For now, we are still continuing our pilot testing, expanding the number of participants and types of transactions. Starting from September 2026, all clients of major banks will be able to open digital ruble accounts and convert non-cash rubles into digital rubles and vice versa. I would like to emphasise that this is an option and not a requirement as the use of the digital ruble must be and will be absolutely voluntary.

Together with the Russian Ministry of Finance, the Federal Treasury, and the Russian regions, we are preparing for the introduction of the digital ruble in the fiscal system. Recently, we have conducted a successful experiment with digital ruble payments under capital construction agreements where the control over targeted use of the allocated funds is of critical importance. What is the advantage of the digital ruble platform here? Our technology allows for rules to be set at the programme level, stipulating to whom and for what a payment can be made, e.g. to a specific contractor or subcontractors, for concrete, towards wages, etc. Rules can also determine the exact moment when a payment must be made, e.g. upon receiving a confirmation of work acceptance via the public system.

I believe that the digital ruble will be used extensively in the fiscal process, including at the regional level.

I would like to thank the pioneering regions – the Republic of Tatarstan, the Chuvash Republic, and the Rostov Region – that helped us test targeted payments. Our colleagues have seen for themselves that the digital ruble enables saving on the fiscal process administration, not to mention that funds are credited instantaneously. Digital ruble transactions will become available to all regional and local budgets in 2027. However, I think we should already determine which transactions would be more efficient to conduct in digital rubles.

Digital infrastructure is the area where we are closely collaborating with the Russian Ministry of Digital Development and the Government by creating services integrated with the Public Services Portal. A good example is the social account and social deposit, which are innovations of this year, and I would like to thank you for supporting this initiative. The launch of this facility was made possible only due to the interaction between banks and the Public Services Portal. Banks can verify whether an individual meets all the criteria stipulated by law, while an individual does not have to collect a bunch of documents and can open this deposit account in one click. I think, with the course of time, this instrument will become a form of support, albeit a modest one, for people with small incomes.

Our objective is to ensure not only that the financial market is technologically advanced and mature, but also that consumer rights are well-protected. The Federation Council also shares this approach and proves it by action rather than words.

Nevertheless, we do understand that no rules or changes will play any role if those who break them face no repercussions. I have raised this issue multiple times – fines for banks. Compared to the profits banks now make when violating consumer rights, these fines are derisory, while they should be commensurate with both the violation and the bank’s size. In this case, a large bank will think twice before breaking these rules. Banks are experts at running the numbers. The fines we are proposing now – which some call excessive – have been effectively applied for a decade in cases of anti-money laundering violations. I find they are working very well. I hope we will see the same deterrent factor in consumer protection, which is no less important, and I thank the senators working on the relevant draft law.

Another topic that we are continuously discussing with the Federation Council is preventing over-indebtedness. There are three key areas here. The first one is legislative guarantees for borrowers. The second is the limitation of debt burden. The third area is countering illegal lenders.

We have put in much effort to develop the legislative guarantees. Now, I will only mention the law on loan repayment holidays for small and medium-sized enterprises. This safety net enhances businesses’ confidence.

For individuals, the right to take loan repayment holidays has been in place for a long time already. Currently, we intend to supplement it with a comprehensive debt settlement mechanism. When a borrower has outstanding loans and microloans issued by different banks and microfinance organisations (which is not rare), he or she should have an opportunity to postpone repayments without having to apply to each lender individually. The Russian President has issued a relevant instruction, and a relevant draft law has been lately submitted to the State Duma. We count on your support too.

The next on the list are the adopted laws regulating buy-now-pay-later services, which we have been discussing for a long time. It is good that the rights of consumers using these services are finally protected and this legislation gap has been closed.

Nevertheless, we still have to develop the regulation of the instalment mechanism for housing purchases. We are working on it together with the Government, and I hope we will ensure strong protection of consumer rights here as well.

This is important because an instalment plan is also a kind of loan. We believe that funds should be transferred to the apartment seller only after the apartment has been registered as the property of the buyer to avoid any abuses. Before that, money should be held in an escrow account, as is now the practice with mortgages.

Finally, similarly to standard buy-now-pay-later services, the data on such transactions must be submitted to credit history bureaus. If we want to prevent banks from making people go bankrupt, they should be given an opportunity to assess the overall debt burden of individuals, including their outstanding buy-now-pay-later balances. Currently, when a bank issues a loan, it does not know about any existing property instalment plans, which can involve considerable outstanding amounts.

However, this is important for reducing the portion of loans to over-indebted borrowers. Over the past two years, we have managed to decrease the percentage of consumer loans to people with high debt burden to 21%, which is an almost threefold reduction. ‘With high debt burden’ means that a person spends over half of his or her income on debt servicing. We believe this principle should be introduced in other sectors as well.

Another topic I would like to discuss, which has always been the centre of our attention, is microfinance organisations. Currently, a draft law is being prepared for the second reading, which, in our view, will further strengthen regulation in this sector.

We are taking consistent steps to curb the proliferation of illegal lending. Unfortunately, there are many illegal creditors in the financial market. Over the past three quarters, we have detected nearly 5,800 financial pyramid schemes, unlicensed lenders, and other illegal companies and projects. We actively assist law enforcement agencies in countering them, including by initiating the blocking of illegal creditors’ and fraudsters’ websites (more than 16,000 websites were blocked over the first nine months of 2025).

Telephone fraud is an equally acute problem. Over a short period of time, with legislators’ support, we have significantly expanded the range of measures to counter this type of fraud. We are already seeing the first positive signs, that is, a reduction in the number of phone fraud complaints. Over the first nine months of 2025, it dropped by 15%, but we have to make sure that this trend is sustainable. It is too early to tell as this is just the first positive sign.

A mechanism for setting a self-ban on loans has been operating since March 2025, which we have also discussed together. I should say that this mechanism has proven to be very popular. Almost 17 million people have already used this option.

A self-ban is a good safety net, but it still requires an individual to take certain, albeit minor, steps. In September 2025, a new automatic mechanism was introduced, which is a cooling-off period before issuing large loans and microloans. This is a period that comes after a loan has been approved but before the loan funds are credited to a person’s account, which is intended for banks to make sure that a borrower is not acting under the influence of fraudsters. We will see whether it is efficient, as it has only recently started operating.

In addition, from September 2025, ATM cash withdrawals are also covered by anti-fraud protection. Using the criteria established by the Bank of Russia, banks verify whether a person is under the influence of fraudsters or whether cash is being withdrawn by them. Having detected any signs of unusual behaviour, banks can limit ATM cash withdrawals. It is certainly very important to monitor how this rule is applied to ensure that there are no unjustified restrictions for bona fide borrowers.

The last thing I would like to mention here is that an attack carried out by fraudsters always involves two stages: first, a person receives a call, and second, funds are withdrawn. Banks have already learnt to detect suspicious transactions and continue to work on suspending them. When they fail to do so, they are held liable and must reimburse the stolen funds. That is, if they do not follow the stipulated anti-fraud procedures. In our view, telecom operators should certainly follow similar rules as they too are able to monitor this activity. They should establish a clear and unified plan of action, develop a list of signs to identify fraudulent calls, and bear their responsibility if funds still get stolen. This is one of the key issues covered by the Anti-fraud 2.0 package of draft laws currently developed by the Government, and we are also involved in this work, providing input on aspects under our purview. We believe it to be crucial to truly reverse the trend and achieve tangible results in our efforts to combat fraud, which affects many Russians.

This, I believe, covers the key points I intended to address today. There are many aspects to our work and we have received a lot of questions from you. We have answered all of these questions in writing and, hopefully, our explanations were clear. Certainly, we are ready to stay in contact and answer your questions not only at meetings, but also on an ongoing basis, as is already the practice. Thank you very much for your proposals as they enable us to develop more efficient and balanced decisions.

Thank you for your attention. I will be happy to answer any questions you may have. Thank you.