Belgazprombank allows outflow of funds from Belarus amid lower interest rates

A twofold increase in the rate of deductions to the Fund of Required Reserves (FOR) for attracted funds in foreign currency does not contribute to the acceleration of de-dollarization of the economy and reduces the effectiveness of the measures taken by the NATIONAL BANK in monetary policy earlier. This is stated in a letter from the management of Belgazprombank to the Association of Belarusian Banks.

The tightening of the criteria for assessing the credit risk of foreign currency loans (in terms of assessing the adequacy of foreign exchange earnings), as well as the purposeful work of the National Bank to reduce interest rates on loans in Belarusian rubles, set the task for banks to significantly change the currency structure of the loan portfolio, and, accordingly, change the currency structure of the resource bases. Currently, about 70% of the funds of the banking system attracted from customers are denominated in foreign currency. This structure has developed under the influence of high inflationary and devaluation expectations in recent years. “It will take a lot of time to change it, and first of all, a long period of low inflation and stability in the foreign exchange market.

In the context of limited sources of resources in the national currency, the increase in the reserve requirement ratio actually made it impossible to work on changing the currency structure of the loan portfolio, since additional attracted resources in Belarusian rubles are directed mainly to fulfill the increased reserve requirements. As a result, almost 30% of the ruble money supply (excluding cash) is directed not to the economy, but to the FOR.

The leaders of Belgazprombank offer the banking community to discuss this issue and initiate before the National Bank the introduction of appropriate changes in the procedure for calculating and fulfilling reserve requirements.

In particular, bankers want to bring the rates of deductions to the FOR to the level of the beginning of 2017 (no more than 7.5%). The significant difference in reserve requirements from funds in national and foreign currencies (4% and 15% respectively), according to experts, is designed to encourage banks to reduce rates on funds in foreign currency to increase the attractiveness of savings in Belarusian rubles. However, at the current stage, the effectiveness of such a measure is " doubtful ".»: a further reduction in the already quite low interest rates on foreign currency deposits (deposits) will rather provoke an outflow of foreign currency liquidity from the economy than prompt a change in the currency of deposits to Belarusian rubles. With regard to non-residents or Belarusian subsidiaries of foreign companies, a further reduction in interest rates may provoke a withdrawal of funds by parent structures, which will lead to an outflow of funds from the republic, Belgazprombank believes.

Therefore, bankers propose to exclude client funds attracted for a long period (over 1 year) from the reserve base, or to reduce the amount of deductions for such funds. The second suggestion is to reduce the reserve base by the amount of cash Belarusian rubles available to banks. Both proposals have a wide foreign practice, the letter emphasizes.

In addition, it is proposed to give banks the right to fully or partially fulfill reserve requirements calculated from funds raised in foreign currency in freely convertible currency (or in the currency of attraction of funds). This will improve the quality of asset and liability management of banks, will contribute to the de-dollarization of the loan portfolio and reduce the cost of loans in the national currency for the economy, according to Belgazprombank.