Tag: Rosbank

House of Cards

mir-sberbankA disembodied hand proudly holding a Sberbank-issued Mir card. Photo courtesy of PressTV

Central Bank Preparing for Cutoff of Some Banks from International Payment Systems
Regulator Asks Small Banks to Have Backup Intermediary Able to Service Their Cards
Anna Yeryomina
Vedomosti
December 6, 2018

The Russian Central Bank has asked small banks to find a backup partner that would be able to service their bank cards. This would be an asset if their current intermediary banks were cut off from international payment systems.

The Central Bank is concerned with the continuity of card transactions in banks that work with payment systems indirectly, that is, via an intermediary bank. The regulating authority has advised these indirect clients of payment systems to contract with another bank, besides their primary intermediary bank, that could supply them with access to card payment systems. Five bankers confirmed to us they had received the memorandum.

The memorandum also says the contract should provide for a test exchange of information when integrating with the new intermediary banks. It also states payment systems should draft an action plan and recommend it to their participating banks.

The major intermediary banks are Payment Center Credit Union, Uralsib, VTB Bank, Rosbank, and Promsvyazbank.

A Central Bank spokesperson stressed the memorandum was only advisory, but it was based on international recommendations for risk management in payment systems. The need for banks to contract with backup intermediary banks is not so obvious. According to several of its recipients, in early autumn the Central Bank had sent banks a letter urging them to draft plans to ensure the continuity of payments, but it had not recommended any specific measures.

Switching intermediary banks is a time-consuming, expensive process that takes between three to six months, notes Maya Glotova, director of Kartstandart, a processing center that partners with Payment Center Credit Union. The most high-profile case occurred in 2013 after Master Bank’s license was revoked. As Glotova recalls, Master Bank had functioned as an intermediary bank in payment systems and provided payment processing services. Small banks had to halt their operations for several weeks, and several of them had to leave the payments business. Glotova estimates it would cost a single bank more than $100,000 to switch intermediary banks in the three payment systems.

Intermediary banks had little to say about the memorandum. A spokesperson at Promsvyazbank promised to follow the Central Bank’s recommendations, while a spokesperson at VTB Bank said their own intermediary program had worked well.

Several bankers believe the Central Bank is hedging not only against the collapse of intermediary banks but also potential sanctions, which are fraught with the possibility that intermediary banks would be cut off from Visa and Mastercard, as occurred in 2014 and 2015. The United States has been drafting a new set of sanctions that could affect major banks. Payments within Russia would not be affected: these transactions are processed by the National Payment Card System (NSPK). Russian bank cards, however, would not function abroad. (A spokesperson for NSPK, which operates the Mir payment system, said they had not received the Central Bank’s memorandum.)

VTB Bank had drafted a plan to counter sanctions, its president, Andrei Kostin, told the TV channel Rossiya 24 in October.

“We have been mapping out with both the government and the Central Bank how to avoid the consequences, especially for individuals and companies. I think we can overcome them. I don’t think the sanctions will be wholesale and directed against the entire financial sector,” Kostin said.

Translated by the Russian Reader

Stability

DSCN1722Russians queued up at a popular currency exchange in central Petersburg on September 19, 2018, as the ruble took yet another plunge, fueled by rumors that the regime was planning to “dedollarize” the Russian economy. Photo by the Russian Reader

Foreign Currency Deposits Withdrawn from Sberbank: Depositors Take Out Over $2 Billion in Two Months 
Vitaly Soldatskikh
Kommersant
October 6, 2018

In September, Russians continued to aggressively withdraw foreign currency from accounts in Sberbank (Savings Bank). Over the past month, the amount of these deposits decreased by $900,000,000, while the amount has decreased by more than $2 billion dollars since the beginning of August. The outflow of funds from the savings accounts of individual depositors took place as rumors of a possible forced conversion of foreign currency deposits grew. However, after reasurring statements by Elvira Nabiullina, chair of the Russian Central Bank, as well as a rise in rates on foreign currency deposits, the outflows may decrease.

On Friday, Sberbank published its monthly statement before other Russian banks, as usual. According to these figures, as we have analyzed them, the populace’s foreign currency-denominated bank deposits in Sberbank decreased by $901 million or 2.7% in September and now total $32.5 billion. Likely as not, Russians simply withdrew this money from the bank without exchanging it for rubles and redepositing it. According to Sberbank’s statement, the populace’s ruble-denominated sight deposits and term deposits descreased last month by 45.78 billion rubles or half a percent to 9.65 trillion rubles. Overall, the outflow of foreign currecy deposits slowed compared with August, when individual clients withdrew $1.18 billion from the bank.

Sberbank’s press service confirmed the outflow of $900 million in deposits by retail clients in September, but noted the inflow of funds from commercial clients amounted to approximately $1.5 billion. (This calculation was made using the bank’s in-house method.)

Sberbank termed August’s outflow of foreign currency deposits the product of a “managed evolution of the bank’s balance sheets.”

Meanwhile, in late August, Sberbank introduced a new seasonal foreign currency deposit plan, valid until the end of September, with annual interest rates that varied from 1.5% to 3%. (The highest rates was for customers willing to deposit a minimum of $150 million for a period of three years.) Currently, Sberbank’s highest interest rate for dollar-denominated deposits is 2.06%, whereas a number of major banks, including VTB Bank, Russian Agricultural Bank (Rosselkhozbank), Alfa Bank, and Rosbank, offer interest rates on dollar-denominated deposits of 2.5% per annum.

September’s outflow of deposits from Sberbank occurred as VTB Bank chair Andrey Kostin made a series of statements about the possible implementation of harsher sanctions, under which Russia’s state-owned banks could be stripped of the ability to make dollar-denominated transactions. Were this to occur, Kostin said, VTB Bank could not rule out having to disburse funds from dollar-denominated accounts in another currency as a way of upholding the bank’s obligations to its clients. These statements by the head of Russia’s second largest bank did not go unnoticed. Central Bank chair Elvira Naibullina was forced to calm bank customers by denying the possibility of a compulsory conversion of deposits. According to Naibullina, such moves would only undermine confidence in Russia’s banking system.

According to our analysis, foreign currency deposits held by commercial clients at Sberbank increased by $1.43 billion in September. This occurred largely due to the growth of long-term deposits by commercial firms. Deposits made for terms of three years or longer grew by $1.56 billion, while deposits for shorter terms shrunk. Also, the balances on the accounts of foreign companies grew by $902 million. The ruble-denominated balances on Sberbank accounts held by commercial clients grew by more than 222 billion rubles in September. This increase was mainly due to the nearly 151 billion rubles in additional monies raised by the Federal Treasury.

According to Fitch Ratings, the most considerable outflows in corporate funds, adjusted for fluctuations in the foreign currency exchange rate, were observed at Sberbank (117 billion rubles or 1.7%), Gazprombank (87 billion rubles or 2.8%), and Rossiya Bank (58 billion rubles or 9.4%). Retail deposits also declined mainly at Sberbank (107 billion rubles or 0.9%) and banks undergoing reorganization by the Central Bank (35 billion rubles or 3.2%), while other banks enjoyed a fairly uniform increase in retail deposits.

According to Ruslan Korshunov, director for bank ratings at Expert RA, the largest Russian credit rating agency, “Rumors of the Russian economy’s dedollarization and the possible conversion of foreign currency deposits into rubles could have pushed a segment of the populace to withdraw their money from state-owned banks, against which sanctions could be strengthened.”

At the same, Korshunov noted the outflow of retail deposits in September could also have been caused by a seasonal factor: the return of the populace from holiday and, consequently, an increase in consumer activity. However, he believed these factors had a one-off effect and such outflows were highly unlikely in October.

Translated by the Russian Reader