Center for Strategic Assessment and forecasts

Autonomous non-profit organization

Home / Economy and Finance / Causes and nature of the current crisis / Articles
The Central Bank is preparing a new devaluation
Material posted: Publication date: 14-01-2015

Yesterday the Russian Central Bank resumed auctions on granting to commercial banks by 1.1 trillion rubles per month with virtually no collateral, to be exact – under the so-called non-market assets. Pumping money banks can lead to a new wave of ruble devaluation, since the protection from the flow of money the Central Bank on the foreign exchange market has not been created. The cut-off rate at yesterday's auction amounted to 17,25%. However, the current inflation rate and the potential weakening of the ruble due to the fall in oil prices may be even higher. Russian financiers were previously called pumping banks in rubles of the Central Bank the main cause an artificial weakening of the ruble in the beginning of last year.

The cut-off rate on three-month auction, the Bank of Russia secured by non-market assets held on Monday, amounted to 17,25% annual, announced by the Central Bank. Earlier, the Central Bank set the maximum amount of funds auctioned under non-market assets to 1.1 trillion rubles. "the extent of the Excess supply in the auction over the sum redeemable on the day of disbursement of loans will allow banks to reduce the debt on loans secured by non-marketable assets provided within the framework of operations of constant action, and to reduce the burden on market provision", – stated in the message of the CBR. Office Elvira Nabiullina in 2015 promises to hold monthly three-monthly auctions to provide loans secured by non-marketable assets with floating rate.

Money on results of auction on January 12, should be submitted by 14 January. On this day, banks must repay to the Central Bank funds in the auction held on October 13, 2014. Then banks picked 596,1 billion rubles, with the limit of 600 billion rubles.

Theoretically, the Central Bank should provide rubles to commercial banks for further lending to the real economy. Today, however, lending in Russia virtually stopped. After raising the key rate, many commercial banks either refuse the loan or to renegotiate the terms for these loans. For example, according to United credit Bureau, Russian credit institutions at the end of last year declined nearly 95% of requests for credit, and to borrow money in December could only every 20th client.

In the beginning of last year the ruble was weakened significantly against the dollar. And it happened amid the high oil prices mainly due to the actions of the Central Bank, indicated by Russian experts. The Russian authorities have started to lower the national currency, trying to close cheap ruble formed in the Russian budget hole predicted by experts. "This is a speculative attack on the ruble, which is encouraged by the actions of the monetary authorities", – explained the chief economist Sistema Evgeny Nadorshin on radio "Business FM".

"In January 2014, the Central Bank gave commercial banks 480 billion rubles at the rate of 5.76% per annum – which is below inflation and in fact negative under percent. It is obvious that under such rouble stuffing on the strengthening of the national currency could not count, pointed out the chief economist of Sberbank CIB Evgeny Gavrilenkov. So, the experts said, the Central Bank itself has launched an unwinding mechanism of the devaluation, to stop which will be not so easy (see "NG" on 03.02.14). Meanwhile, officials blamed the fall of the ruble anyone – exporters, importers, the population, the enterprises and the banking sector. "Exporters may delay the sale of foreign currency earnings, and importers can buy foreign currency for the future, because they have to pay for the contract. This behavior, which stems from the constant expectation of depreciation of the ruble", – stated in November in an interview with TV channel "Russia 24" Chairman of the Central Bank Elvira Nabiullina.

At the same time the head of the regulator said on introduction of temporary restrictions on granting ruble liquidity, explaining the purpose of the Central Bank to dampen speculative attacks on the ruble weakening. "We will temporarily limit the provision of ruble liquidity, because it is used not only for financing of economy, but also for playing on the currency market," she said.

Continuing to fight against "currency speculators", almost immediately after raising the key rate of the Central Bank has introduced a number of credit institutions with their specialitatea, the so-called commissioners of currency to oversee the monetary transactions of banks. So, if a commercial Bank opens a large currency position, the representative of the Central Bank has the right to request proof of action in the interests of their clients, and not for the purpose of the organization itself. The Central Bank's authorized representatives also have the right to attend all meetings subordinate to a credit institution, interested in open currency position and the customers, who are buying the currency.

However, according to experts, "NG", to date, as such mechanism of control over foreign exchange transactions of commercial banks actually do not see. "In my opinion, a mechanism that completely eliminated the flow of funds to the foreign exchange market, is now missing," recalls Investcafe analyst Mikhail Kuzmin. Besides, the expert believes, in the current unstable situation, the liquidity of banks is more important than the non-admission of funds on the foreign exchange market.

"Not to lend to banks also impossible – this can lead to liquidity crisis, and hence to the subsequent collapse of the banking system," says financial Ombudsman Pavel Medvedev.

Most likely, says the analyst of investment holding "Finam" Anton Soroko, to limit the flow of funds to the foreign exchange market by the Central Bank in the coming months will not. "Similar restrictions will be in effect in manual operation mode, because the regulator will be sufficient to exclude impact on the prices of the ruble of the top 20 Russian banks and will be a dialogue, as the need of the Central Bank and credit institutions", – predicts analyst.

Pumping the RUB commercial banks in the short-term negative impact on the ruble, says the head of the analytical Department of Grand Capital Sergey Kozlovsky. But one ruble banks pumping may not be sufficient to resolve the banking sector problems. "In parallel, the Central Bank should proactively manage key rate, because its current value has a negative impact not only on import substitution but also on the development of domestic business in General, which, in turn, will influence the continued stagnation of the Russian economy", – concludes the economist.

Olga Solovieva


RELATED MATERIALS: Economy and Finance