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logistics (6%). On other areas accounted for only 1%. The Central Bank considers operations as shady financial services, which are aimed at cashing money, or their withdrawal abroad on fictitious grounds in order to avoid taxes, legalize criminal proceeds and for corruption.
Moscow’s property market is showing signs of life as Russians pile into mortgages ahead of expectations of rising interest rates. Russians have already taken out over RUB2 trillion ($30.5bn) worth of mortgages in the first nine months of this year – more than all the mortgages taken out in 2017 – as mortgage rates defy the central bank rate hikes and fell to an all time low in September. The spending has translated into more construction. VTB Capital (VTBC) said in a note that the area under construction in Moscow grew 9% y/y to 131mn sqm in the third quarter, after three flattish quarters.
Interest rates are up but mortgage rates have fallen to their lowest ever year; mortgages lost 45bp YTD to a historical low of 9.41% in September, according to the CBR. That lead to RUB 2.07 trillion worth of new mortgages, more than all of 2017. Mortgage deals in Moscow were up by 35% y/y and 32% y/y in the third quarter of 2018 and 9mo18, respectively, according to the CBR. Prices on the primary housing market have also started to grow again after two years of no change: primary prices increased 9-12% y/y in Moscow and St Petersburg in the third quarter of 2018, while the secondary market remained generally flat. The mortgage rates are expected to continue to rise from here and the weighted average could top 10% by the end of this year according to experts. Much depends on how Russia’s geopolitical sanctions show down with the US plays out. As of October 1, the portfolio of mortgage loans issued in total was RUB6.24 trillion worth of mortgages. Overdue mortgage in arrears by more than 90 days decreased in September by 0.05 pp to 1.89% of the total portfolio, according to Dom.rf. For the first nine months of 2018, 55% of deals for new buildings and 46% on the secondary housing market were concluded with a mortgage.
Russia’s Deposit Insurance Agency (DIA) says it may increase the maximum amount of deposits cover by the agency in the case of a bank’s collapse from RUB1.4mn ($21,180) to RUB2mn ($30,256) in an effort to reassure the population shaken over the summer by rumours the government was planning to forcibly convert their dollar savings into rubles.
The current limit of insurance compensation is RUB1.4mn per depositor, which means the full insurance protection covers 99.63% of the accounts of individuals in all operating banks. The share of DIA insurance liability is 67.92% of the volume of insured deposits, a DIA representative told Vedomosti. The DIA is nominally funded by a small tax on retail deposits held by all banks, but this has not generated enough money to cover all of the DIA’s liabilities since 2015.
In 2013 the DIA allocated RUB103.9bn to payments of affected depositors, in 2014 RUB202.4bn, in 2015 RUB369.2bn, and in 2016 RUB663.4bn, whereas in 2017 the DIA spent RUB438.9bn, as that was the year the CBR introduced the new Banking Sector consolidation fund which takes the ownership of a failed bank under the direct control of the central bank, but as the bank stays open there is no need to reimburse depositors.
Starting in 2015 the Central Bank was forced to start giving the DIA loans so it could meet its commitments. The regulator issued a five-year unsecured loan to the agency that year which has grown to more than RUB1 trillion. The debt of the Deposit Insurance Agency to the Central Bank at the end of 2017
66 RUSSIA Country Report December 2018 www.intellinews.com