Russian central financial institution dismisses retail deposit freeze rumours

MOSCOW (Reuters) – The Russian central financial institution has sought to dismiss rumours a couple of doable freezing of retail deposits, which have seen explosive development in latest months as a result of rising rates of interest aligned with the regulator’s benchmark fee.

Russia’s benchmark fee rose to 21% final yr, marking the best degree because the early years of President Vladimir Putin’s rule, because the central financial institution targets inflation pushed by authorities spending and spiralling wage development.

In response, banks supplied clients short-term deposits with rates of interest as excessive as 30%, prompting a frenzy as folks shifted cash between banks in pursuit of the perfect yields, together with issues a couple of potential financial savings bubble forming.

Involved about their financial savings, Russians inundated the central financial institution with questions on a doable freezing of deposits as a approach to fight the rising bubble, after retail deposits reportedly grew by one-third in 2024, in keeping with official estimates.

“This concept is absurd. Moreover being a gross violation of the rights of residents and corporations to handle their property, such a step would undermine the foundations of the banking system and the monetary stability of the nation,” the regulator mentioned on its Telegram channel.

VTB Financial institution estimated that Russians obtained round 7 trillion roubles ($68 billion) in curiosity on their deposits in 2024. The deposit rush drew cash away from the inventory market and the true property sector.

Many Russians misplaced their financial savings as a result of hyperinflation following the collapse of the Soviet Union in 1991 and once more throughout the banking sector meltdown within the 1998 Russian monetary disaster.

The Russian banking system largely weathered the 2008-2009 disaster, in addition to Western monetary sanctions first launched in 2014 following the annexation of Crimea.

After the beginning of Russia’s army motion in Ukraine in 2022 all main Russian banks are underneath Western sanctions. Nonetheless, the nation’s banking system has to this point prevented financial institution runs and bankruptcies.

“If deposits are frozen, folks will lose belief in banks and the monetary system as a complete for a very long time,” the regulator mentioned, emphasizing that such a measure would gas inflation whereas rendering the important thing rate of interest ineffective.

($1 = 102.9955 roubles)