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After the introduction of the digital ruble, 9 trillion rubles may leak from banks
Material posted: Publication date: 26-11-2021
Due to the introduction of the digital ruble, Russian banks will face an outflow of liquidity: by the end of 2024, 9 trillion rubles may flow from banks into a new form of money. This forecast is given by experts of the Center for Macroeconomic Analysis and Short-term Forecasting (CMACP). 5 trillion rubles. may leak from the accounts of citizens, another 4 trillion rubles. - companies. An estimate of 9 trillion rubles. the authors of the report call the upper limit of the possible outflow - subject to the rapid implementation and removal of restrictions on the maximum amount of funds transferred to digital rubles.

Sberbank estimated the amount of the flow into digital rubles from the banking system on the horizon of three years was more optimistic – 2-4 trillion rubles, said in December 2020, Deputy Chairman of the Board of Sberbank Anatoly Popov.

Who will issue digital rubles

The digital ruble will become the third form of money along with cash and non-cash rubles. The Central Bank will create a special platform for settlements through the digital ruble. People and companies remain customers of banks, but they will become intermediaries and will carry out orders from customers to open wallets in digital rubles and to make payments through the Central Bank platform. Through it, the regulator will issue a digital ruble, open wallets to customers (each of them will have two — for online and offline payments) and banks, execute customer orders that will come through banks, and conduct transactions on the platform by banks.

Bank customers will be able to access the digital ruble from any bank's mobile application. For offline payments, a second digital wallet will be created — on a mobile device.

The Central Bank intends to complete the development of a prototype of the digital ruble platform in December of this year, and start testing from January 2022. The first group of the pilot project included 12 banks.

To compensate for the outflow, the Central Bank will have to provide banks with 8-8.5 trillion rubles of liquidity, experts of the CMACP note, and to neutralize deflationary pressure due to a decrease in the money supply, it will have to reduce the key rate by 0.25 percentage points. 

If there is no "compensating lending" on the part of the Central Bank, a number of serious changes may occur in the banking system, according to the CMACP: the compression of absolutely liquid assets will be so large-scale that banks will not be able to continue further payment and settlement activities due to lack of available funds.

To compensate for the lack of liquidity, banks will start selling the most quickly realized assets – government securities and highly liquid foreign assets. The scale of dumping of state papers in the CMACP is estimated at about 2 trillion rubles. (as of September 1, according to the Central Bank, banks held OFZ for 6.4 trillion rubles), foreign assets – 500 billion rubles, or about 4% of the portfolio.

A possible reduction in the portfolio of state securities will inevitably lead to an increase in OFZ rates, experts write. The economy will face a situation of a shock increase in the transfer curve, which determines the level of rates for a large number of transactions – this will mean a system-wide increase in rates in the economy. Thus, in the absence of countermeasures by the Central Bank, the monetary conditions for the functioning of the Russian economy will tighten. The sale of foreign assets will create some pressure on the ruble in the direction of strengthening, but it will be incomparable in its strength with the scale of pressure on the level of quotations of state securities. 

Lack of liquidity will lead to the fact that banks will issue fewer loans. The approximate reduction in the loan portfolio will be 4-5% (now, according to the Central Bank, the loan portfolio is 67.4 trillion rubles). First of all, loans to enterprises (49.3 trillion rubles) will be under attack, since they are largely funded by demand funds, which will flow into the digital ruble, according to the CMACP: loans to the population are longer and are funded mainly by term deposits of citizens. The reduction of loans and the likely increase in interest rates on borrowed funds will lead to the fact that banks' profits will decrease by about 10%. 

The reduction of the Central Bank's key rate will keep market interest rates at the same level as it was before the introduction of the digital ruble, and will compensate banks for the increase in potential costs. 

The market is waiting for an outflow

The Central Bank, announcing the concept of the digital ruble in April, urged banks not to fear a sharp outflow of funds into digital rubles. Changes in banks' balance sheets due to the digital ruble may affect the cost of funding, noted the deputy chairman of the Central Bank Alexey Zabotkin, but the regulator will fully take this into account when assessing monetary conditions and forecasting their changes. It takes a very strong demand for the digital ruble to create a liquidity deficit in the sector, Zabotkin said.

The slowdown in lending may be noticeable if the spread of the digital ruble is not synchronized with the easing of monetary policy and the provision of liquidity to banks by the Central Bank, says Stanislav Volkov, managing director of the NKR rating agency. To activate the provision of liquidity, it will also be necessary to mitigate the requirements for collateral for loans from the Bank of Russia, he believes. In addition, the Central Bank can additionally mitigate the risks of very sharp flows into the digital ruble by introducing limits on the size of electronic wallets and gradually weakening them.

In theory, a tangible outflow of liquidity from banks' balance sheets with the introduction of the digital ruble is indeed possible, Stanislav Duzhinsky, an analyst at Home Credit Bank, agrees: then banks will face a funding shortage and will be forced to compensate for this by raising interest rates on loans, which will lead to a decrease in their availability. Most likely, he believes, the Bank of Russia understands the possible risks and will do everything to level them and maintain the stability of the system.

The population will be wary of the introduction of digital currency, including due to the insufficient level of domestic technological progress, which can cause interruptions in payments at least at the early stages of implementation, says Anatoly Perfiliev, Junior Director for Bank Ratings at Expert RA. Therefore, the introduction of the digital ruble is not a quick issue for Russia and will require significant resources and time from the government before achieving any positive effect. As the digital currency develops, banks will gradually feel the outflow of liquidity, Perfiliev says, but it will not be critical due to the strong stretching of the implementation process and the uncertainty of the parameters of the functioning of the digital ruble.

VTB estimates the outflow at 9 trillion rubles. they consider it significantly overstated, including due to the length of the process in time, says Andrei Prudnikov, head of the treasury of the state bank. The main increase in funds on digital wallets of citizens will occur due to a decrease in cash turnover, the banker believes. At the same time, banks will continue to develop their own cashless payment services, including using a new form of money. To minimize the risks of rising loan rates and slowing lending, the Bank of Russia will support banks by providing long-term financing and lowering the key rate, Prudnikov concluded.

Ekaterina Litova

Source:After the introduction of the digital ruble, 9 trillion rubles may leak from banks - Vedomosti ( ) 

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