«The opportunities for displacement of the dollar»: what caused a record demand of Russian banks in the European valuutakomitee link

Vladimir Agoev,
Vladislav Ivanov
According to the Central Bank, in September the Russian banks increased their purchasing rate of the European currency to $1.87 billion — the highest since July of 2018. A value more than two times exceeded the volume of dollars purchased. Experts attribute the observed dynamics, with a gradual Moscow’s refusal to use the national currency of the USA in the calculations with their key trading partners. In addition, the demand for Euro cash in the country rose with the news about the possible introduction in Russia of negative interest rates on deposits.

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Demand of Russian banks for cash Euro reached its highest level in more than a year. As follows from the materials of the Central Bank, in September, lenders have increased their purchases of the European currency by 52% to $1.87 billion, the figure was the highest since July of 2018. At the same time, the importation of dollars has decreased by 18% to $738 million

In General, in September banks have bought foreign currency in the amount of $2.63 billion of this amount, nearly 71% came in the Euro, and the dollar’s share fell to the lowest level since August 2014 and amounted to 28%.

According to the regulator, from the beginning of 2019, Russian banks have imported into the country dollars in the amount of $7.8 billion, and the Euro at $9.5 bn, RT Interviewed analysts have linked this trend with increased Russia’s transition to settlements in national currencies with their key trading partners. So, businesses are increasingly required Euro cash for operations with European companies.

«Over the past year the share of Euro in foreign trade transactions of Russian companies grew by 4% in January — June amounted to 21%. The trade with EU countries accounted for 43.1 per cent of the total foreign trade turnover of Russia. In other words, the ability to displace the dollar at least in this area are great,» — said in a conversation with RT head of Department of analytical researches of the Higher school of financial management Mikhail Kogan.

As told by RT, the expert of «international financial centre» Vladimir rozhankovsky, the actions of banks and associated with a marked increase in the share of the Euro in the reserves of the Bank of Russia and funds of the Ministry of Finance. By 2018, the share of national currency of the United States in international reserves of Russia fell two times — from 45.8 to 22.7%. At the same time, the share of Euro increased from 21.7 to 31.7%. The data provided by the Central Bank.

«Russia is steadily moving towards de-dollarization and Euro cash is required to ensure electronic transactions the Ministry of Finance and the Central Bank,» added rojankovsky.

In addition, due to the purchase of euros, banks are trying to get additional profit. So, depreciating for the last time on the world market the European currency is starting to go up. This was in conversation with RT said an analyst CC «Finam» Alexey Korenev.

«Earlier, the Euro had been oversold because of concerns that fail to agree on the «soft» scenario of breccia. Therefore, the currency was actively sold. Now the risks of the «hard» breccia gone, and the demand for the Euro is beginning to return,» added Koren.


«Demand for rubles is expected to grow»: why Russia may be introduced negative interest rates on foreign currency deposits

Since the beginning of year in Russia has considerably decreased rates on Bank foreign currency deposits. While the Central Bank assume that interest on deposits…

The Russians also greatly increased its purchases of the European currency in September. According to Central Bank data, compared to August, the volume purchased by the population of the European currency grew almost twice — to $497 million. it is Noteworthy that the demand for the Euro increased sharply after the news about possible introduction of negative Deposit rates in Russia. So, in September the Central Bank announced a study of the ability to allow banks to take possession of the dollars and euros at negative interest.

The growing popularity of negative interest rates abroad led to the fact that the deposits of Russian banks in other countries became unprofitable. First of all we are talking about Europe, where the Deposit rate is minus 0.5 percent per annum.

As explained by Alexey Korenev, Russian banks have to provide their clients with better conditions than have themselves in the placement of deposits in Euro, and therefore operate at a loss. As a result, many credit institutions have already tried to solve the problem and recoup their losses. In particular, a number of banks have ceased to open deposits in euros or began to charge a Commission for depositing money in the European currency.

As previously explained RT the head of Department of investments «BCS» Narek Avakian, an initiative of the Central Bank can spur ordinary citizens to refuse deposits and begin storing their foreign currency savings «under the mattress». However, as noted by Michael Kogan, the news about possible introduction of negative interest rates on deposits has not caused a mass withdrawal of cash from foreign currency accounts.

«Data on operations of physical persons in foreign currency it is impossible to say about the closure of the accounts in euros and withdrawal of cash» — said Kogan.

Moreover, in mid-November after a joint discussion, the Ministry of Finance and the Central Bank decided to postpone the issue of introducing negative interest rates on deposits. About previously stated by Deputy Finance Minister Alexei Moiseev. As later noted by the Chairman of the Central Bank Elvira Nabiullina, the need to pay for storage of money in foreign currency could adversely affect lending and the economy as a whole.

«We occasionally hear proposals to make rates lower, even make them negative, as in Europe, to increase the lending and accelerated growth. But the fact that the rate becomes negative, the reasons that hinder investment will not disappear. In most countries, which resorted to negative rates, lending has not increased, but has slowed», — said Nabiullina during a speech in the state Duma on November 20.

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