More than half of the banks in the top 30 in terms of balances on deposits with the Central Bank are foreign

Banks controlled by foreign owners have recently held a significant amount of free liquidity in deposit accounts with the Central Bank, in some cases – from 40% to 90% of all assets. According to Kommersant’s interlocutors, this instrument is absolutely risk-free for foreign banks, including from a political point of view.

More than half of the banks in the top 30 in terms of balances on deposits with the Central Bank are foreign, as follows from the reports of credit institutions, which Kommersant analyzed. As of the last reporting date—October 1, 2023—the leader in absolute volume of balances is Unicredit Bank (RUB 188 billion). Judging by balances, for individual players the volume of funds on Central Bank deposits takes up from 40% to 90% of the size of assets. For example, a significant volume was placed by such banks as OTP Bank, Intesa Bank, Deutsche Bank, Sumitomo Mitsui Rus Bank, Commercial Indo Bank, etc. The largest bank in the Russian Federation with foreign capital, Raiffeisenbank, has sharply increased its balances by deposits with the Central Bank – up to 100 billion rubles. by the beginning of October with less than 0.5 billion rubles. at the beginning of May. However, as a percentage of assets this is an insignificant amount, amounting to up to 5%.

Some foreign players have reduced their balances to zero in recent months, such as Citibank and Isibisi Bank.

“Free funds can be placed by banks at their discretion; the deposit account is not subject to regulatory requirements for a minimum balance,” notes Citibank. OTP Bank noted that the increase in balances on deposits with the Central Bank is associated with an influx of funds into customer accounts and deposits and, as a consequence, an increase in free liquidity. “The bank pursues a balanced risk policy, moderately increasing lending, and prefers to place the resulting free liquidity in risk-free instruments, such as Central Bank deposits,” they clarified.

There are a number of alternatives to placing funds on deposit with the Bank of Russia: purchasing OFZs with a floating coupon, reverse repo, issuing an interbank loan, notes banking expert Alexey Nechaev. “Their profitability is not lower than the interest rate charged by the Bank of Russia, and the capacity of the corresponding segments of the financial market is quite sufficient to digest all the funds stored by the subsidiaries of foreign banks in deposit accounts with the Central Bank,” says the expert. Interbank market rates are usually higher than the regulator’s deposit rates; the difference in September could be 1–1.7 percentage points.

Foreign banks behave extremely carefully, explains financial expert Olga Ulyanova. The entry of foreign subsidiaries into the interbank lending market is limited for political reasons, since it is fraught with entering, directly or indirectly, into relations with sanctioned Russian banks. “The difference in rates between placements in the Central Bank and on the interbank market does not play a decisive role, since the goal of foreign “subsidiaries” now is not to earn as much profit as possible, but to attract as little attention as possible to their activities in Russia, “she explains. “They have to balance between active, highly profitable activities and conservatively maintaining a balance with placing excess liquidity in the Central Bank at a nominal rate, which, however, is also not so low.”

Mr. Nechaev also believes that “in the case of subsidiary banks of financial institutions of unfriendly countries, the decision to keep significant funds in the Bank of Russia is clearly not dictated by business logic.” “Perhaps this is the unofficial position of foreign parent organizations, which are under pressure from national authorities and thereby demonstrate movement towards curtailing any activities in the Russian Federation,” notes Mr. Nechaev.

Olga Sherunkova