Page 119 - RusRPTApr23

smoothest possible operation of the payments system and the banking sector have been a top government priority throughout the Russo-Ukraine war.
Most domestic payment traffic had already been shifted prior to the war away from the international SWIFT payment system to the SPFS system owned by the Central Bank of Russia. SPFS operation was expanded in 2022 and now operates around the clock. Russia’s alternative to Western payment cards was rolled out on a broad scale in 2018. Since then social benefits and wages paid by the state have only been deposited in bank accounts associated with a Mir card. The market exit of Western mobile payment options has forced banks to offer solutions based on the CBR-owned Faster Payment System (SBP). While domestic payment traffic flows fairly smoothly, Western sanctions and the reluctance of Western banks to get involved with payments to or from Russian counterparties have made foreign payments increasingly challenging. Moreover, despite Russia’s efforts to attract banks in “friendly” countries to join the Mir system, the response has been fairly muted.
Following a sudden stop in March, domestic bank activity in Russia gradually returned to near-normal function. Total corporate lending contracted slightly in March-June, but the pace of new lending was quite brisk in the second half of the year. Growth in total lending was boosted by many state-backed programmes or interest support programmes for such groups as systemically critical firms and small-and medium-sized businesses, as well as funding for housing construction projects. Interest rates sank back to pre-invasion levels towards the end of last year. Besides support programmes, extensive loan restructurings increased the amount of total lending, which was up by about 14 % y-o-y at the end of 2022.
The growth in total household lending last year was driven by housing loans. The growth in housing loans, in turn, reflects the government’s extremely generous interest-support programme. Housing loans for new apartment purchases were available at a fixed 7 % rate, i.e. significantly below the central bank’s key rate for a large part of the year. Special breaks were offered to groups such as families with small children, soldiers sent to the front and IT professionals. The stock of consumer credits contracted in the spring and barely grew in the second half of the year. At the end of 2022, total household lending was about 10 % higher than a year earlier.
The market panic in the spring, the collapse of the ruble’s exchange rate and high interest rates caused severe problems for many banks. A more granular assessment is not possible at this point due to the unavailability of bank-specific information for 2022. On the other hand, temporary easing of bank solvency rules and liquidity support from the central bank helped banks get through the worst of it. Bank balance sheets were generally healthy going into the war and the CBR has evaluated that the banking sector is capable of withstanding moderate credit losses. Although banks targeted by sanctions must effectively surrender their assets in the West, international operations
119 RUSSIA Country Report Russia April 2023 www.intellinews.com