The Bank of Russia presented its Financial Stability Review for the period of Q4 2023 to Q1 2024, highlighting the resilience of the Russian economy amidst high interest rates and ongoing sanctions. Filipp Gabunia addressed key vulnerabilities in the financial sector, emphasizing that while businesses are showing strong growth and lending is increasing, certain risks persist.
Gabunia noted that "the Russian economy is sustaining strong economic growth," with no significant increase in restructuring and a continued rise in retail lending. However, he pointed out vulnerabilities stemming from sanctions and domestic issues, identifying five key areas of concern.
Efforts to limit household debt burdens have shown progress, with macroprudential limits reducing loans to overindebted borrowers significantly. Gabunia stated, "Since last year, we have relied on macroprudential limits to limit the growth of the debt burden."
A new vulnerability identified was the increased concentration of corporate lending. The liabilities of major companies have shifted structurally due to sanctions, with external loans decreasing and being replaced by domestic bank loans. This has led to potential risks if any large company defaults.
To address these concerns, Gabunia mentioned plans to limit credit card issuance for borrowers with high payment-to-income ratios and increase macroprudential add-ons for unsecured and car loans starting July 1st. He also highlighted efforts to manage concentration risks through syndicated lending and bonds.
Regarding international payments, challenges remain due to sanctions affecting business operations and currency market imbalances. The Bank of Russia has increased exchange swap transaction limits to support yuan liquidity.
Gabunia discussed the impact of tight monetary policy on financial stability, noting inflationary pressures necessitating a prolonged high key rate. Interest rate risk remains a concern for banks due to short-term deposits not covered by regulatory capital.
In terms of mortgage lending, slower growth is expected but not anticipated to create problems for developers. Measures have reduced high-risk mortgage loans in recent quarters.
In conclusion, Gabunia affirmed that "the Russian financial sector is now stable," but emphasized the need for accumulating capital buffers and reducing vulnerabilities amid positive economic developments.