Report: Sanctions against MoEx not to threaten stability

MOSCOW, Nov 22 (PRIME) -- If the West slaps sanctions on the Moscow Exchange, they will not threat Russia’s financial stability, Yelizaveta Danilova, head of the central bank’s financial stability department, said in an interview to Izvestia daily published on Wednesday.

When asked whether the possible sanctions against the Moscow Exchange would pose a threat to the country’s financial stability, she said, “No, they wouldn’t.”

The central bank continuously analyzes the risks of new sanctions, and has to have a plan of action in case this happens. The authority is working on a plan together with the Moscow Exchange that would minimize the risks for the market players, she said.

The central bank also does not expect Russian banks to suffer any crisis from the recent increase of the key rate.

“The banks are in a stable condition, they are recovering their profits. We don’t expect the increase of the rates to have a noticeable negative impact on the banking sector,” Danilova said.

The negative revaluation of Russian banks’ securities portfolio amounted only to 300 billion rubles in the entire banking sector from July 1 through November 1. Banks usually redeem their bonds, the bulk of which have floating rates, early, she said.

But the increase of the long-term OFZ federal bonds’ yields is limited with the yield on 10-year OFZ bonds contracting after the October meeting of the regulator’s board of directors, she said.

Danilova also said that the quality of mortgage loans in Russia worsened significantly, and new regulatory measures are necessary.

“Over the past years, the share of borrowers with the debt-to-income ratio of over 80% rose to 47% in the third quarter of 2023 from 20% at the beginning of the pandemic. The same thing happened with the initial installment as more than 50% of borrowers that took out a mortgage have low initial installments of less than 20% of the loan, while the share of these borrowers was below 30% at the beginning of 2020,” she said.

So far, the central bank can only regulate the mortgage sector through macroprudential markups, and they are less effective for banks with a large capital. This made the regulator to turn the markups to a prohibitive level of up to 900% for the most risky loans from October 1. But setting a limit that would directly restrict the share of risky loans in a portfolio would be a more efficient instrument.

“That is why it was very good when banks suggested that we return to the idea of using macroprudential limits in mortgage lending. We expect this instrument to emerge next year, and we will start using it,” Danilova said.

(87.8701 rubles – U.S. $1)

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