Elvira Nabiullina, the head of the Central Bank of Russia, addressed the Association of Russian Banks with a review of last year’s banking sector outcomes and forecasts for the future. She noted that despite challenges such as inflation and increased competition for loans, the sector remained steady and profitable.
“While the banking sector did well last year, it was not without its difficulties,” she stated. The year saw sanctions affecting nearly all banks and contributing to exchange rate volatility. However, she assured that “the banking sector remains steady and profitable.”
Nabiullina emphasized three focus areas for banks: capital growth, anticipating credit risks by improving loan quality, and addressing emerging bad debt. She highlighted that retail lending had overheated but subsided by mid-year due to rising interest rates and tougher measures to reduce household debt.
Corporate lending continued to grow until November 2024, driven by investment projects and housing construction. For 2025, corporate lending is expected to expand at a more moderate rate of 8–13%, with no contraction in credit anticipated.
Mortgage portfolios grew by 13% in 2024 but are expected to slow down this year. Consumer loans expanded moderately last year with an estimate ranging from -1% to +4% for this year.
She acknowledged improvements in lending standards due to tighter regulation aimed at mitigating potential losses from high-risk borrowers but warned about remaining risks. “About half of newly issued mortgages come with a 20–30% down payment,” which may be insufficient given recent price gaps between new and existing housing.
The rapid credit expansion over the past two years was supported by regulatory easing allowing banks to accumulate capital buffers. However, Nabiullina stressed that further credit growth would need moderation as many banks lack excess capital.
She outlined priorities in banking regulation under current conditions, including introducing a countercyclical capital buffer starting at 0.25% from February. The accumulation of capital buffers will also be incentivized through macroprudential measures targeting major overindebted borrowers.
In terms of consumer protection, she noted positive developments due to regulatory amendments solving cases related to manipulated effective interest rates on loans but mentioned ongoing issues like mortgage schemes inflating housing prices.
Finally, Nabiullina discussed advancements in cashless payments where their share continues growing steadily: “Cashless payments currently account for 85.8%.” A single QR code based on National Payment Card System (NPCS) solutions is being considered along with ongoing efforts toward implementing digital ruble initiatives following successful pilot projects involving select bank clients.
Nabiullina concluded her speech inviting questions from attendees while expressing readiness alongside deputies present during this substantial delegation meeting organized by Mr Aksakov’s initiative supporting comprehensive discussions regarding these matters impacting Russia’s financial landscape today.
