The Russians sent a record amount of foreign currency abroad

Compatriots in June brought abroad the maximum for the last four years – for the entire time of the publication of such statistics by the Central Bank – the amount of currency. This is evidenced by the data of the regulator, published on August 19. During the first summer month, the amount of transactions of citizens in favor of non-resident banks reached $4.7 billion. The withdrawal of funds accelerated after the easing of restrictions by the Central Bank of the Russian Federation on foreign transfers and the introduction of commissions by banks for storing currency on accounts within the country. What will such an outflow of capital lead to, do the owners of foreign accounts risk losing them, and why the transfer of funds abroad may continue in the future, experts told us.

According to the Bank of Russia, in June 2022, citizens of our country placed 266.1 billion rubles worth of foreign currency on accounts and deposits in foreign banks at an average exchange rate of 57.2 rubles per US dollar. In dollar terms, this amount was $4.7 billion, which can be considered a record since 2018. Compared to May, the volume of transfers to foreign banks tripled.

The regulator noted that prior to this, a surge in such transactions was at the beginning of the crisis – in February their volume reached $4.3 billion. In total, as of July 1, Russian households kept $44.7 billion in foreign banks, which is 11.6% more than a month earlier.

According to Svetlana Zubkova, Associate Professor of the Department of Banking and Monetary Regulation of the Financial University, there are three main reasons why citizens withdraw funds abroad.

Firstly, Russians are looking for an opportunity to open cards abroad, having lost the ability to pay with cards issued by Russian banks. When opening an account and issuing a card, foreign banks often set a minimum permanent balance on the account, as a result, many are forced to transfer significant amounts to card accounts. Plastic or virtual cards issued by foreign banks can then be used to purchase goods in online stores abroad or while traveling.

Secondly, some fairly well-to-do citizens decided to temporarily or permanently leave Russia this half of the year, and of course, they began to transfer their funds to foreign banks, the expert pointed out.

Thirdly, a fairly large number of citizens began to consider buying real estate abroad, which led to the transfer of significant amounts. But risks remain, the economist warns.

“Now the EU sanctions requirement is in effect: there should be no more than 100 thousand euros on the account of citizens who have a Russian passport, the rest of the amount is blocked,” recalls Zubkova. – In countries that have not joined the sanctions, there is no such requirement yet. But it is very difficult to predict how events will develop – sanctions may be tightened, new countries may join the sanctions, so any forecasts are meaningless.

In the event of a negative scenario, that is, when money is blocked in the account, most likely, you will have to wait, constantly proving to a foreign bank the need for these funds to ensure life abroad, the expert warned.

According to Georgy Svirin, a specialist in international financial markets at the Finmir marketplace, after April there was a clear trend towards a decrease in deposits in foreign currency and the cash currency itself in Russia.

“There is no need to look for a mystery here: in late spring and early summer, banks, brokerage and other financial organizations began to introduce a commission for storing a number of currency items from unfriendly countries on the accounts of legal entities and individuals,” the analyst points out. “There have also been reports of a ban on a number of banks from conducting cross-border transactions using the SWIFT system.”

In other words, a tacit process has begun to squeeze US dollars and euros out of the foreign exchange savings of Russians and from the turnover of entrepreneurs. Do not forget about the citizens who this year decided to leave the country: someone’s organization changed their “registration” to a foreign one, or for other reasons. Naturally, people who leave take their hard currency savings with them and open accounts in foreign banks.

According to the expert, the withdrawal of funds by individuals abroad has a rather weak effect on the country’s economy. After all, it is blocked by the ongoing inflow of foreign currency from the sale of oil and oil products, natural gas, coal, fertilizers, agricultural products and metallurgical plants. Although the countries of Europe, the United States and a number of others imposed sanctions on the list of items, Russian enterprises were able to redirect export flows very quickly. Therefore, Russian enterprises, and banks along with them, have access to the currency, part of which was previously accumulated on accounts, which facilitates operational activities.

“As a result, the outflow of currency has little effect on individuals and legal entities, as well as on the country’s economy,” Svirin concludes.

In principle, the current trend of capital flight in foreign exchange is normal in an environment of economic instability. Most likely, the observed decline in the volume of cash and the volume of deposits in foreign currency in banks will continue, because the logical finale may be even more “tightening the screws” against the US dollar and the euro, the expert believes.