The savings Bank has sharply cut rates on deposits

Rates on ruble deposits “Hold”, “Replenish” and “Control” the state Bank has decreased on 0,5–1,05 p. p. depending on the term and amount of the contribution (see table). For deposits in the currency of the savings Bank has lowered rates to virtually zero: now the minimum bet is 0.01%. If in April rate of Deposit “Hold” in the amount of $1 thousand was 0.3% in the three months to 0.9% at six months and 1.35% for 12 months, now Deposit rate by the same amount is 0.01% for a period of from one to six months and of 0.65% on the annual contribution. Rate under the same contribution in the amount of €1 thousand in April, the rate was 0.15% at three months, 0.3% at six months and 0.5% at 12 months. Now the rate of Deposit for this amount is equal to 0.01% for a period from one month to two years.

In April, the Deputy Chairman of the Board of Sberbank Alexander Morozov told Bloomberg that the Bank in 2016 may reduce interest rates on foreign currency deposits “hundredths of percent”. However, he added that “rates below zero we are mentally not ready yet”. In November, the head of Sberbank German Gref at a meeting with President Vladimir Putin announced that the Bank is not experiencing shortages of foreign currency liquidity, but, on the contrary, observes “a large excess of foreign currency liquidity”.

Sberbank dominates the Russian banking market, which is likely to be followed by other players, says Fitch analyst Alexander Danilov. In General, the reduction of interest rates on foreign currency deposits fit the strategy of de-dollarization of the banking system that will reduce risks and increase sustainability, says Danilov.

In February, the head of the Central Bank Elvira Nabiullina said that one of the objectives of the Central Bank in 2016 will be the de-dollarization of banks ‘ balance sheets. According to her, in the end of 2014 or beginning of 2015 has seen an increase of foreign currency deposits of the population. Nabiullina also noted that the process of de-dollarization will affect the deposits of enterprises.

According to Danilova, the dollarization of deposits is dangerous because the banks have to accumulate foreign assets so as not to suffer losses in case of devaluation. But this, in turn, leads to growth of foreign currency loans, which creates higher risks, as the number of borrowers who have foreign currency earnings, limited added Danilov.

At the end of January 2016 in the whole banking system on deposits in foreign currency accounted for 30%, or 6.8 trillion rubles, says a senior banking sector analyst “Aton” Michael Ganelin. The organizations, the share of deposits in foreign currency by 55% and 10.4 trillion rubles, Ganelin adds. “The share of loans to individuals in foreign currency is very small — less than 3% of all retail loans. The share of foreign currency loans to companies representing 40% of all corporate loans,” notes the analyst.

Among the companies of foreign currency loans is basically taken by borrowers with income in foreign currency, i.e. exporters, says analyst NRA Karina Artemiev. “But it is in theory, in practice in the currency used to take almost everything, as the dollar was stable, and the percentage was smaller,” she adds.

In General, the reduction of interest rates on foreign currency deposits to such low levels may induce people to shift from currency into rubles, but it all depends on the devaluation expectations, says Danilov.

As far as reducing interest rates on deposits in rubles, the reason is that the banking system moves from a structural liquidity deficit to surplus, explains Daniel. Analyst at ACRE Kirill Lukashuk stressed that the reduction of interest rates on ruble deposits could be caused also by the expectations on the reduction of the key rate this year.