Page 78 - RusRPTOct21

The same can't be said for the smaller businesses that are frequently seen as undesirable orrowersyanks given the economic climate. These credit divergences show you where power lies – the SOEs, quasi-monopolists, andig firms are all fine while consumers face a much rockier climate as do the SMEs that rely heavily on their consumption.
The Central Bank data shows that RUB1.41 trillion ($21.bn) of risky consumer debt is "category 5" or the loans that are completely impaired. Of that, 94.3% is covered by reserves.
What's more telling is that while category 4 is much smaller by volume – only RUB156bn – but only 38.2% of that is covered by reserves. That means that another downturn or worsening of household finances won't necessarily create a huge stress on the banking system insofar as there aren't nearly as many category 4 as category 5 borrowers,but that there aren't reserves right now to cover those losses effectively.
All the more reason to look closely at how wage and pensions politics are playing out. Putin just ordered that the 2022-2023 budgets index the wages of security and military personnel above inflation. The aim would the to increase their wages in real-terms, which in a climate where 70+% of Russians claim to have no savings left is aig deal. The safer they make state jobs without broadly shared real income growth, the more that'll affectorrowing and credit politics.
8.1.5 Liquidity, NIMs & CARs
OFZs: Investments in debt securities increased insignificantly in August
(RUB8bn, or 0.5%), including due to the redemption of one of the OFZ issues of RUB290bn. At the same time, the emission the activity of the Ministry of Finance of Russia increased in August: the total volume of OFZ amounted to about RUB413bn following on from RUB154bn issued in July, of which about 57% wereoughty Russiananks, which was comparable to July.
Liquidity: In August, the volume of liquid assets (cash, claims on the bank of Russia and non-pledged market collateral) slightly decreased RUB100bn to RUB15.2 trillion, which is a comfortable level sufficient to cover 31% of the total customer funds, according to the Central Bank of Russia (CBR).
The volume of liquid assets of credit institutions in foreign currency also grew significantly, $5.4bn to $52bn, mainly due to an inflow of foreign exchange funding. At the same time, the coverage of clients' foreign exchange funds and foreign exchange liabilities remains quite comfortable, amounting to 21% and 15%, up from 20% and 14% at the end of July respectively.
The daily average ruble liquidity surplus (which Fitch assesses as liquidity thatanks keep on interest-bearing deposits with the CBR andanks' investments in short-term CBR bonds) decreased to RUB1.7 trillion (2% of sector assets) in July from RUB2.1 trillion in June,ut grew again to RUB2.1 trillion in August. Sector liquidity was reasonable, with highly liquid assets (defined as cash and equivalents, short-term placements withanks and
78 RUSSIA Country Report October 2021 www.intellinews.com