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Russian banks experience no liquidity shortage — Central Bank

November 25, 2014, 14:06 UTC+3 MOSCOW
Russia’s Central Bank is “a creditor of last resort” and banks should primarily be focused on market sources of raising capital, Central Bank First Deputy Chairman Alexey Simanovsky said
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Alexey Simanovsky

Alexey Simanovsky

© Valery Sharifulin/TASS

MOSCOW, November 25. /TASS/. Russian banks experience no liquidity shortage while the regulator helps the banks overcome the structural liquidity deficit, Central Bank First Deputy Chairman Alexey Simanovsky said on Tuesday.

Russian banks should take and are actually taking efforts to raise capital from other markets to make up for the closure of western markets amid sanctions, he told Rossiya-24 TV Channel.

“I don’t think that banks are experiencing a shortage of liquidity, if we speak about the banking sector as a whole. In this regard, the Central Bank of Russia is covering the structural liquidity deficit quite successfully,” he said.

At the same time, Russia’s Central Bank is “a creditor of last resort” and banks should primarily be focused on market sources of raising capital, including their funding through household deposits, he said.

Growing liquidity shortage

Central Bank First Deputy Chairwoman Ksenia Yudayeva said in September that banks’ structural liquidity shortage was expected to increase to 1 trillion rubles ($22 billion) by the end of the year.

Deputy head of the directorate for the analysis of financial conditions for monetary policy implementation at the Central Bank’s monetary policy department Elena Romanova said the regulator is ready for a seasonal increase in structural liquidity deficit, which can be compensated, among other things, by the instruments of lending against the pledge of non-market assets.

The structural liquidity shortage in the Russian banking sector has been caused by several factors, including the need to replenish the Reserve Fund until 2017, currency interventions, household demand for foreign exchange and the regulator’s exchange rate policy.

Currency risks

There are currency risks for Russian banks, caused by a shift to the ruble’s free floating, Simanovsky added. “A free-floating rate of the ruble also assumes currency risks, it will have meaning for banks. Respectively, they must protect themselves from currency risks more thoroughly,” he said.

The Central Bank abolished the floating ruble rate against a dual-currency basket of $0.55 and €0.45 and interventions to regulate the ruble rate and decided to free float the ruble on November 10.

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