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As of the beginning of May, problem corporate loans were covered by individual provisions at 75% and general provisions at 114% (compared to 75% and 115% at the beginning of April), while retail loans were covered at 91% and 128%, respectively (compared to 91% and 129% at the beginning of April).
8.1.5 Liquidity, NIMs & CARs
LIQUIDITY: The reserve of ruble liquidity, which includes cash funds, claims on the Bank of Russia (A), and unencumbered market collateral, increased by 0.9 trillion rubles. This growth was primarily driven by funds from regional entities (+0.6 trillion rubles) and borrowings from the Bank of Russia against non-market assets (+0.3 trillion rubles). Within the structure of liquid assets, balances held with the Bank of Russia saw an increase of 1.2 trillion rubles, while unencumbered market collateral decreased by 0.3 trillion rubles due to repo transactions with financial corporations.
The total volume of ruble liquidity assets (B) reached approximately 17.3 trillion rubles, which is considered an adequate level to cover 23% of customer funds in rubles (C) or 50% of retail funds. Banks also have the option to obtain 9.3 trillion rubles (12% of customer funds) from the Bank of Russia against non-market collateral assets (D). Therefore, the available sources of ruble liquidity cover up to 35% of customer funds in rubles (35% in April).
However, it's important to note that the reserve of ruble liquidity is not evenly distributed across the sector. Nevertheless, the money market allows for the mitigation of some of these risks, as some banks can attract significant amounts of liquidity on the interbank market from banks with excess liquidity.
The reserve of foreign currency liquidity (55bn US dollars) is also at an adequate level, covering approximately 54% of customer funds and 29% of foreign currency obligations (F) (47% and 28% respectively in April).
The sufficient levels of ruble and foreign currency liquidity reserves indicate the overall stability of the banking system. Adequate liquidity buffers provide banks with the necessary resources to meet customer demands and honor their obligations. This supports the smooth functioning of the financial market and enables banks to effectively manage their operations.
BONDS: The portfolio of debt securities increased by 139bn rubles (+0.7%), primarily due to banks' purchase of new issuances of government bonds (OFZ) amounting to 170bn rubles. This constitutes approximately 60% of the total placements by the Russian Ministry of Finance (compared to 20% in April). The increased interest in OFZ in May is attributed to the issuance of bonds with variable coupon income (OFZ-PK), accounting for around 40% of the total issued bonds. The majority of these bonds were acquired by banks, which helps minimize interest rate risk.
Overall, the issuance activity of the Russian Ministry of Finance slightly increased in May compared to April, with OFZ placements totaling 285bn rubles. In addition to banks, there was demand for OFZ from investment funds,
113 RUSSIA Country Report July 2023 www.intellinews.com