Russian banking system is experiencing massive outflow of foreign currency from individuals' deposits. Observers note that population is actively withdrawing money from their deposits, especially when it comes to foreign currency deposits. Until recently, interest for deposits in dollars and euros were significantly lower compared to ruble deposits, but they were still in demand among population. Lacking sufficient financial knowledge and having concerns about savings, population made bet on foreign currency deposits, believing that this is the best way to protect savings from inflation and sharp depreciation of the ruble.
However, situation has changed in recent months. Large retail banks, fearing new international sanctions against Russia and continuation of the outflow of depositors' funds, started to improve attractiveness of foreign currency deposits. In the first half of November, ten of the top 30 banks of Russia improved profitability of dollar deposits. Best rates of some of those banks are already approaching 4% per annum. Some of those banks also improved conditions of deposits in euros. According to head of the Central Bank of the Russian Federation, Elvira Nabiulina, volume of foreign currency deposits in the Russian banking system amounts to approximately $87 billion, and current processes don't threaten stability of the Russian banking system.
According to analyst Eduard Avakov, part of the country's population misinterpreted statement of the financial community about possible conversion of exchange rates into ruble and took "adequate", at least as they believed, measures to protect their savings, deciding to make deposits. Vacations' season also affected current situation.
Individuals actuallu withdrew about $2.2 billion from the banking system. Corporate sector withdrew another $6 billion to repay debts, which have been increasing since the West imposed sanctions against Russia.
By the end of third quarter foreign currency reserves in the banking system have significantly decreased. According to the Central Bank of the Russian Federation, outflow in October reached $0.5 billion. Now banks worry about outflow of currency liquidity, so they are forced to raise deposits' rates.
Rising these rates affects expectations regarding similar increase of interest rates in the international market. These expectations are not groundless. Over the past year and a half, the US Federal Reserve has raised refinancing rate 6 times and is about to raise it again this December.
According to Eduard Avakov the Ministry of Finance played a certain role in today's deficit of dollar liquidity, since it was actively buying up currency from open market in the first half of 2018. Under current conditions, banks have to raise interest rates on foreign currency deposits in order to stop withdrawment of deposits. The first bank to make such decision was Sberbank. Back in August, it increased maximum rate from 1.3% to 3.5%. Gazprombank introduced new type of currency deposit - "Currency Income" - at a rate of 2.8% per annum under condition of not withdrawing deposit for a period of one to three years. As of right now, the VTB just increased profitability of its foreign currency deposits by 0.4%-0.5%. After this, example given by these giant banks should be followed by other participants of the banking sector.
