Page 72 - RusRPTJun19

respondents of the poll believe that current economic environment was bad for savings, 38% were undecided and 21% believe it was good time for saving. Only 11% see next year as favourable for saving. According to Rosstat data, only 3.7% of all household income was saved in 2018, which is the smallest since the 1998 market crash when 2.5% of income was saved.
Unsecured lending continues to boom. In the first quarter of 2019, Russians borrowed 1.9 trillion rubles ($29.4bn), the majority of, which (RUB1.05 TN, $16.3bn) came in the form of unsecured loans. This marks a 25% year-over-year increase in unsecured lending. As deputy Bank of Russia (CBR) chairman Dmitry Tulin explains, with real disposable incomes declining annually, people are tired of “living an ascetic lifestyle.” So they’re taking out consumer loans to maintain some standard of living. This is all good and well while the economy is stable, but any serious bumps in the macroeconomic situation—by way of harsh sanctions or declining oil prices—could cause a banking crisis. As one banking exec worries, the memory of the 2014 crisis appears short-lived. Unsecured lending grew 2% in March compared to February. CBR analysts point to two potential causes: (1) an increase in large purchases, such as apartment repairs or furniture sales, and (2) counterintuitively, CBR measures to cool the market. Starting on April 1, the central bank increased risk ratios for unsecured loans, which may have prompted banks to increase lending before the regulatory change. The real concern is that credit growth currently stems from existing, not new, borrowers. As borrowers take out larger, longer-term loans to refinance smaller debts, the likelihood of repayment decreases. The population’s aggregate debt load is now 9.9%—nearing the 2014 peak of 10.4%.
Small businesses suffer from anti-money laundering measures A survey commissioned by Promsvyazbank and business advocacy group Opora Russia finds that small and medium-sized businesses continue to have their accounts frozen by banks with little explanation. Half of those whose accounts were frozen had to stop operations entirely. This is a classic example of regulation gone wrong. Strict anti-money laundering laws require banks to freeze the accounts of those they suspect, or they could lose their license. After the accounts are frozen, business owners face bureaucratic hurdles, including a fee of 10-15%, in order to get their money back, and they are added to the infamous Central Bank blacklist. So some small businesses have switched to cash and stopped using the banking system entirely — making money laundering harder to detect and leaving everyone worse off. The survey received responses from 2300 small- and medium-sized businesses, 20% of, which had problems with their accounts being frozen in the past year. Half of the accounts are frozen because the account holder did not submit tax forms correctly. The other half were blocked on suspicion of money laundering or because of bank errors. There is little legal recourse for small businesses that suffer losses or go bankrupt because of accounts erroneously blocked by banks. This year, the number of companies that reported doing business in cash jumped from 2% to 8%.
Putin asked the govt and CBR to consider measures to lower mortgage rates to 8% and below by beg-2020. The CBR hikes last year and some tightening of regulation caused rates to grow – current rate around 10%.
Russia’s central bank does not expect to have to bail out more major commercial banks, as it did in 2017, as it has completed about three- quarters of its plan to clean up the banking system, First Deputy Chairman Dmitry Tulin said on Thursday. Russia has spent around $80bn on the clean-
72 RUSSIA Country Report June 2019 www.intellinews.com