“In rubles at the rate of the bank”: how the Central Bank changed the rules of the foreign exchange market

Changes go into effect September 9th

As expected, the Central Bank revised a number of restrictions it introduced in March, at the peak of consumer demand for foreign currency cash. In particular, the Board of Directors of the regulator allowed banks to issue cash to customers from foreign currency accounts and deposits, credited since September 9, in rubles at the bank’s exchange rate. The key point here is related to the date.

“As before, the currency credited from March 9 to September 9, 2022 is issued in rubles at the bank’s rate, but the amount must not be less than that calculated at the official rate of the Bank of Russia on the day of payment,” the message on the Central Bank’s website says. In other words, if before there was a binding, albeit purely formal, legislative, now it is gone. Banks are free to set rates for their clients at their own discretion, without any regard for the Central Bank.

Is it dangerous for Russians who come for their hard currency deposits? On the one hand, there is an instruction from the Central Bank that the amount of the issue should not be less than what would have been obtained at the official rate of the Bank of Russia. And on the other hand, as experts say, the internal sale-purchase rates of banks did not particularly correlate with the official one before.

The regulator upheld the restriction according to which Russians can (but not the fact that they will succeed) withdraw no more than $10,000 (or the equivalent in euros) in cash from foreign currency deposits opened before March 9. Everything else can be obtained in rubles. Also, the Central Bank for six months extended the ban on banks to charge fees for issuing foreign currency from accounts and deposits of individuals.

“The decision regarding the commission will ultimately be a disservice for citizens who want to convert currencies,” says Roman Etkind, specialist in international financial markets at the Finmir marketplace. – Who will forbid the credit institution to take into account the desired commission in the exchange rate? Banks will simply shift it in a favorable direction for themselves – by 3-5%. A more significant deviation will raise questions from the regulator.”

As far as maintaining the $10,000 withdrawal limit, that could piss off people who have a lot more in foreign currency accounts. In the end, this is their personal money, which they have the right to put into circulation and earn interest on it.

But if you look at the situation from the other side, it becomes clear that banks are physically unable to fulfill all requests for issuing cash in US dollars, euros and other “unfriendly” currencies. These bills are simply not in the system now, Etkind notes.

If earlier, at the request of the Central Bank, any necessary amount of newly printed dollars and euros was delivered to Russia by air, but today, due to sanctions, this is not possible. The only exception is the payment of taxes and pensions – these payments are made in a limited format between countries.

“I don’t see any particular risks for the population,” says BitRiver financial analyst Vladislav Antonov. – The point is not that the regulator extended the ban on commissions, and not that it allowed banks to issue cash from foreign currency accounts in rubles at the internal rate. The United States and the European Union have banned the supply of paper dollars and euros to Russia, respectively, it is practically impossible to find them in the public domain, it is pointless to guard them. The issuance of currency is made from cash received by banks from legal entities and individuals. And for converting currency into rubles, the rates are unfavorable: banks buy it 10–12% cheaper than the market rate on the Moscow Exchange.”

It is unlikely that the new rules of the Central Bank will seriously change the situation that has developed in the financial market of the Russian Federation in early spring. Banks have established large spreads of 15-20% (the difference between the buying and selling rate of a currency), and will continue to do so. To be convinced of this, it is enough to go to the application of any bank on a smartphone, where you will have to deal exclusively with the internal rate, says financial analyst Sergei Drozdov. As for the issuance of cash from foreign currency accounts, especially in rubles at the exchange rate of the bank, this is no less a “creative” issue: the actual conditions and the final result can differ greatly from the ideas of customers.