Tag: Russian banks

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Foreign Currency Deposits Withdrawn from Sberbank: Depositors Take Out Over $2 Billion in Two Months 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

Kotlas: Russia’s Bankruptcy Capital

A City of Bankrupts
Vladimir Ruvinsky
Kommersant Dengi
November 28, 2016

Kotlas, a district center in Arkhangelsk Region, will be one hundred years old in 2017. During the first half of the twentieth century, it was one of the main transit centers for political prisoners, but nowadays it is the capital of individual bankruptcies. There is no work in the city, which over the past ten years has become a local consumer’s paradise, and every fourth resident is up to their ears in debt.

In 2012, Kotlas resident Tatyana and her entire family, including her husband, daughter, and brother, took out a total of five million rubles in loans from banks. She asked we not reveal her surname, since her husband is unaware their daughter also took out a loan. As Tatyana says, they took out the loans not for themselves, but for a friend.

“I worked for two female entrepreneurs who sold clothing. We had known each other for something like twenty years. We would visit each other’s homes, go to each other’s birthday parties, and attend the weddings of each other’s children,” Tatyana recalls. “One of them, in fact, asked me to take out the loans because otherwise, she said, they would have to borrow at an interest rate of eight percent on the black market.”

Tatyana borrowed 1.7 million rubles at Trust, Tinkoff Bank, Home Credit, and OTP Bank.

“I worked for my friends selling luxury clothing. The turnover was good so I was not particularly afraid,” she explains.

Soon afterwards, her friends persuaded to take out additional loans for them. Her husband, daughter, and brother agreed to do this, borrowing 900,000 rubles, 1.8 million rubles, and 700,000 rubles, respectively. The deal was based on trust. Tatyana’s family handed the loan agreements over to the female entrepreneurs, and they paid back the loans themselves. This went on for two years.

“In 2014, the police came and searched our workplace. It turned out the women had been running something like a pyramid. They had been borrowing money on paper to purchase goods. They had not been buying anything, however, but had been cashing out the loans,” say Tatyana. “That is how we got in trouble, although we had not taken out the loans for ourselves.”

The banks demanded repayment of the loans. At first, Tatyana admits, she felt like hanging herself.

“But that is no solution. A woman I know hung herself over a loan. Someone shot himself. Well, if I hung myself, the debt would have been passed on to my relatives. So I got up and went to work.” Continue reading “Kotlas: Russia’s Bankruptcy Capital” →