Page 87 - RusRPTAug21

In June, the volume of liquid assets (cash, claims on the Bank of Russia and unsecured market security) decreased by RUB1 trillion, to RUB15.3 trillion. The decline is associated with a reduction in unsecured market collateral by the amount of OFZ that were transferred under repo transactions with the Federal Treasury (mainly as part of the replacement of the Federal Treasury deposits). Also, banks have reduced requirements for the Bank of Russia in order to be able to cover outflows of corporate and government funds and at the same time increase lending. Nevertheless, the volume of liquid assets remains at a sufficient comfortable level and covers the total funds of clients in rubles by 31.4%. Another RUB5.1 trillion, sufficient to cover 10% of customer funds, banks can borrow from the Bank of Russia secured by non-marketable assets (loans that meet the requirements Bank of Russia).
The volume of liquid assets of credit institutions in foreign currency decreased by $5.3bn to $45.3bn, mainly through correspondent accounts with non-resident banks, and partly as part of standard liquidity management operations with foreign parent banks. However, foreign exchange liquidity remains at a comfortable level and allows to cover about 31% of foreign currency funds of corporate clients, or 13% of all foreign exchange liabilities.
The sector's balance sheet capital grew by RUB158bn, which is lower than earned profit due to negative revaluation of securities valued through other comprehensive income (RUB27bn), as well as payment of dividends by individual banks (RUB14bn).
The aggregate capital adequacy ratio in June (N1.0) increased by 0.4%age points to 12.6% (after falling in May due to large dividend payments). The growth of the indicator is provided by the earned
monthly profit and dissolution of macroprudential markups on unsecured consumer loans granted before April 1, 2020.
Capital stock also recovered to RUB6.0 trillion (about 10% of the loan portfolio, but it should be borne in mind that it is unevenly distributed among banks).
8.1.7 Banks specific issues
Authorities and Central Bank have been in talks to allow banks to issue adjustable rate loans, including for mortgages, but limited to high-income Russians who are aware of the risks. By Thursday, the Central Bank is supposed to issue guidance on how to reduce risk for floating rate loans — these are the kinds of loans linked to broader market rates or indexed to an indicator or indicators in some fashion. For those who recall the subprime crisis in the United States, adjustable rate mortgages (ARM) played a central role because initially low rates would adjust upwards after having convinced people to buy at a lower rate than a standard 30-year mortgage. What caught so many people out was the upwards adjustment from the margin on top of the initial rate, which then dovetailed with worsening credit conditions. For ARM, the monthly payments change with interest rates and that’s implicitly the instrument discussed based on the Vedomosti writeup. As an example given, an interest increase from 7% to 9% on a 15-year maturity loan increases your monthly payments by 13% and total overpayment for the loan by 34%. By the looks of it, the government wants to set limits on the size of loans given such
87 RUSSIA Country Report August 2021 www.intellinews.com