26.06.2019

Jörg Bongartz: “If the problem of excess liquidity extends over a long period of time, it means that market mechanisms are not working. Bank liquidity is the bank’s ability to ensure full and timely fulfillment of its financial obligations

The transition of the banking sector to a liquidity surplus may occur at the beginning of next year, the Central Bank predicts. The continuation of the current situation of structural liquidity deficit is a supporting factor for the ruble, experts say.

There won't be enough money

At the end of July, the volume of the structural liquidity deficit in the banking system amounted to 1 trillion rubles, according to data from the Bank of Russia. Last month, banks placed 400 billion rubles on deposits with the Central Bank, while their debt to the regulator remained at the June level - 1.4 trillion rubles. Since the beginning of the year, the banking system's debt to the Central Bank has decreased threefold. At the same time, as the regulator notes, some banks did not have a need for borrowed funds and, on the contrary, acted as a lender, placing their funds on Central Bank deposits and on the interbank lending market.

The liquidity shortage in July was also affected by the outflow of funds (RUB 300 billion) from the banking sector. This happened for the first time since the beginning of the year, the Central Bank notes. “This outflow was compensated by a corresponding decrease in the balances of funds in correspondent and deposit accounts of banks with the Central Bank,” notes the Bank of Russia’s “Liquidity of the Banking Sector and Financial Markets” review.

According to Raiffeisenbank analyst Denis Poryvay, the Central Bank does not take into account bank funds held in correspondent accounts. Meanwhile, according to the analyst’s calculations, in August banks accumulated about 1.8–1.9 trillion rubles in accounts with the Bank of Russia; from this point of view, a structural liquidity surplus has already been achieved, he adds. The chief economist of Renaissance Capital, Oleg Kuzmin, explained that funds in correspondent accounts are growing due to increased contributions to reserves. In addition, according to him, banks keep money in accounts with the Central Bank to ensure liquidity for current transactions. “From this point of view, this money cannot be considered free funds that banks can send to the interbank market or put on Central Bank deposits. Therefore, the regulator does not take them into account when calculating liquidity indicators of the banking sector,” the expert explained.

Despite the shrinking balance between the inflow of funds into the banking sector and banks' debt to the regulator, the Central Bank predicts that the structural liquidity deficit will continue until the end of this year. According to representatives of the Bank of Russia, this will be due to the seasonal dynamics of cash in circulation, the established practice of financing budget expenditures, as well as an increase in required reserve standards for banks.

Previously, the Central Bank had already taken steps to tie up part of the liquidity entering the banking market due to expenditures of the Reserve Fund. In June, the regulator increased the mandatory reserve standards for ruble and foreign currency liabilities of banks. “This measure will allow us to partially absorb the influx of liquidity, and will also help disincentivize the growth of foreign currency liabilities in the structure of liabilities of credit institutions,” the regulator explained then. In addition, from September 1, the Central Bank will reduce the adjustment coefficients for non-market assets that banks pledge to the regulator to attract liquidity. Thus, banks will have to provide more collateral to the regulator. The Central Bank also explained its actions by the presence of a significant amount of free liquidity in the banking system.

Why is a surplus dangerous?

The Bank of Russia's concern about the growing volume of liquidity in the banking system is associated with the risk that the banking system may find itself in a situation of a structural liquidity surplus. This may lead to the fact that, due to excess money, banks will stop raising borrowed funds from the regulator and will begin to more actively place free liquidity on Central Bank deposits and on the interbank lending market. This, in turn, will push money market rates down and lead to cheaper borrowing costs. In this case, there is a danger that available loans will stimulate the population’s demand for goods and lead to inflation.

According to the deputy head of the Central Bank’s monetary policy department, Alexander Polonsky, reducing the deficit and moving to a surplus does not imply an automatic reduction in interbank market rates. “We strive to ensure that interbank market rates remain fairly close to the key rate,” he said.

In addition, there is a risk that banks may direct part of their available funds to the foreign exchange market for speculative transactions, which will negatively affect the ruble exchange rate.

“The persistence of liquidity deficit in the banking system is a supporting factor for the ruble,” says Vladimir Tikhomirov, chief economist of the BCS FG. At the same time, the expert notes that excess liquidity in the banking system does not necessarily lead to an outflow of funds to the foreign exchange market. “This can also happen when there are not enough rubles. If, for example, oil prices fall sharply or geopolitical events that are negative for Russia occur,” he gives an example.

In this situation, the Central Bank itself will actually lose control over the liquidity management process, since it cannot influence the banking sector using the interest rate. “There are already large banks that are practically independent of the Central Bank’s resources and provide long-term credit resources at a rate even lower than the Central Bank’s deposit rate,” says Denis Poryvay. In fact, this means that the regulator is losing control over monetary policy.

The Bank of Russia admits that “the situation of a structural liquidity deficit in the banking sector does not exclude the formation of a short-term excess of funds in the banking sector.” In this case, the Central Bank plans to withdraw part of the excess liquidity through deposit auctions. “In the current conditions, it is more likely that deposit auctions may take place at the beginning of calendar months, when there is a budget influx, plus the demand for correspondent accounts decreases... But in general, other things being equal, the focus will be towards REPO,” Alexander Polonsky told reporters. In addition, according to him, in conditions of surplus, seven-day deposit auctions may become the main operations of the Central Bank. “We already held a deposit auction at the beginning of August, and the situation shows that it was justified,” Polonsky said.

At the beginning of August, the Bank of Russia held the first deposit auction in the last year and a half, taking 100 billion rubles from the market. 62 banks participated in the auction, and their offer exceeded the Central Bank limit (100 billion rubles) almost twice, amounting to 187 billion rubles.

Since April, the Bank of Russia also began selling federal loan bonds (OFZ) from its own portfolio on the exchange market. The Central Bank used these operations to regulate liquidity in the banking sector. In total, the regulator sold government securities worth 132 billion rubles in April-July, effectively exhausting this resource. According to the Central Bank, as of August 1, 2016, OFZ remained in its portfolio for 66.49 billion rubles.

The Central Bank also does not rule out the issue of special debt instruments - Bank of Russia bonds (OBR). “The OBR release will first be a test one. This is not related to the need to absorb a significant amount of liquidity; the volume will be several tens of billions of rubles,” Polonsky said. He added that “there is no need for this tool yet.”

The ruble has become untied from oil

Against the backdrop of a continuing structural liquidity deficit, the Bank of Russia expects that the ruble may remain stable until the end of the month, even despite fluctuations in oil prices. The dependence of the ruble exchange rate on oil prices has decreased in recent months, the Central Bank states. Even the fact that at the end of July - beginning of August the shareholders converted the dividends received into dollars and euros did not affect the exchange rate of the Russian currency. Moreover, the bulk of these transactions occurred during the period of active foreign currency sales by exporters. “As a result, the conversion of part of the dividends into foreign currency did not have a significant impact on the ruble exchange rate,” the Central Bank notes in its review.

The Bank of Russia believes that the dependence of the ruble exchange rate on oil prices may remain low until the end of August. The Central Bank considers the absence of a decision by the Federal Reserve to increase the key rate to be an additional incentive to stabilize the Russian currency. Against this background, the strengthening of the dollar against the main world currencies and the ruble is considered less likely by the Central Bank compared to the end of June.

“In July, there was a decrease in the elasticity of the ruble exchange rate, which is largely due to the seasonal payment of dividends and subsequent reverse conversion. It is expected that, other things being equal, the elasticity of the ruble exchange rate to the price of oil should return to the level it was before (end of June - beginning of July), within some reasonable time frame,” Polonsky said.

“In the short term, the factor of a structural liquidity deficit may have a stabilizing effect on the ruble exchange rate,” agrees Denis Poryvay. However, more important for maintaining the ruble exchange rate, despite fluctuations in oil prices, according to the analyst, remains the influx of currency into the country, including from non-residents buying Russian assets. Oleg Kuzmin says that there is no direct relationship between the amount of liquidity in the banking system and the exchange rate. “The ruble exchange rate is affected by the demand for foreign assets, that is, the outflow of capital from the country,” he says.

According to the Central Bank, in July, the demand of foreign investors shifted from OFZs towards corporate bonds, which caused their yields to decrease. “The reduction in demand from foreign investors forced the Ministry of Finance to more often offer investors a premium at OFZ auctions,” the regulator said in its review. As of June 1, 2016, the share of foreigners in OFZs was estimated at 24.5%.

Albert KOSHKAROV

The concept of liquidity means the bank’s ability to timely and fully ensure the fulfillment of its debt and financial obligations to all counterparties, which is determined by the presence of sufficient equity capital, the optimal placement and amount of funds in the assets and liabilities of the balance sheet, taking into account the relevant deadlines. In other words, the liquidity of a commercial bank is based on the constant maintenance of an objectively necessary ratio between three components: the bank’s own capital, attracted and allocated funds.

Liquidity risk is the risk of losses due to the Bank's inability to ensure the fulfillment of its obligations in full. Liquidity risk arises as a result of an imbalance of the Bank's financial assets and financial liabilities (including due to untimely fulfillment of financial obligations by one or more of the Bank's counterparties) and (or) the emergence of an unforeseen need for the Bank to immediately and simultaneously fulfill its financial obligations.

The risk of insufficient liquidity is the risk that the bank will not be able to fulfill its obligations in a timely manner or this will require the sale of certain assets of the bank on unfavorable terms. The risk of excess liquidity is the risk of loss of bank income due to an excess of highly liquid assets, but little or no income assets and, as a consequence, unjustified financing of low-yielding assets at the expense of attracted resources. The risk of loss of liquidity is associated with the bank’s inability to fulfill its payment obligations within the agreed time frame, and to quickly convert its assets into monetary form to make payments on deposits.

Insufficient liquidity leads to the insolvency of the credit institution. If a credit institution has not fulfilled its obligations to depositors in a timely manner and this has become known, a “snowball effect” occurs - an avalanche-like outflow of deposits and current account balances, leading to fundamental insolvency.

Liquidity risk, on the one hand, is closely related to the mismatch of assets and liabilities (that is, the use of short unstable liabilities for medium-term or long-term active operations), and, on the other hand, to the loss of opportunity (due to general market conditions or deterioration of the bank’s image) attract resources to fulfill current obligations.

The level of liquidity risk is influenced by various factors, including:

· quality of the bank's assets (if the bank's portfolio contains a significant amount of non-performing and non-performing assets that are not backed by sufficient reserves or own funds, then such a bank will lose liquidity due to the need to fund such assets with attracted resources);
· diversification of assets;
· the bank's interest rate policy and the general level of profitability of its operations (a constant excess of the bank's expenses over its income can lead to a loss of liquidity);

· the magnitude of currency and interest rate risks, the implementation of which may lead to depreciation or insufficient return on operating assets;

· stability of bank liabilities;
· consistency in terms of attracting resources and placing them in active operations;

· the image of the bank, which provides it with the opportunity, if necessary, to quickly attract third-party borrowed funds.

Liquidity risk is closely related to the following risks: credit, market, interest rate and currency. For example, credit risk worsens the bank’s liquidity, as it leads to an imbalance of assets and liabilities in terms of terms and amounts; and market, currency and interest rate risks may cause a decrease in the value of the bank's assets or increase the value of liabilities.

A commercial bank is considered liquid if the amount of its cash and other liquid assets, as well as the ability to quickly raise funds from other sources, are sufficient for the timely repayment of debt and financial obligations. In addition, a liquid reserve is necessary to satisfy almost any unforeseen financial needs: concluding profitable loan or investment transactions; to compensate for seasonal and unforeseen fluctuations in demand for credit, replenishing funds in case of unexpected withdrawal of deposits, etc.

Illiquidity risk can be disclosed as the risk of balance sheet imbalance in terms of liquidity.

The balance sheet is considered liquid if its condition allows, through the rapid sale of funds on the asset, to cover the urgent obligations on the liability. The ability to quickly convert a bank's assets into cash to fulfill its obligations is determined by a number of factors, among which the decisive factor is the correspondence of the timing of placement of funds to the timing of raising resources. In other words, whatever the liability is in terms of maturity, so should be the asset. Only then is a balance achieved between the amount and timing of the release of funds from the asset in cash and the amount and timing of the upcoming payment on the bank’s obligations.

The liquidity of a bank's balance sheet is affected by the structure of its assets: the greater the share of first-class liquid funds in total assets, the higher the bank's liquidity. Bank assets according to the degree of liquidity can be divided into three groups:

1) liquid funds that are in immediate readiness, or first-class liquid funds (cash, funds in a correspondent account, first-class bills and government securities);
2) liquid funds at the disposal of the bank that can be converted into cash. We are talking about loans and other payments in favor of the bank with deadlines for execution in the next 30 days, conditionally marketable securities registered on the stock exchange (as well as participation in other enterprises and banks), and other valuables (including intangible assets);
3) illiquid assets (overdue loans, bad debts, buildings and structures owned by the bank and related to fixed assets).

When analyzing illiquidity risk, first-class liquid funds are taken into account first.

There are the following ways to assess and manage liquidity risk:

carrying out analysis and assessment of the ratio of assets and liabilities according to the degree of liquidity, i.e. assets and liabilities are distributed into appropriate groups according to the degree of decreasing liquidity and taking into account their maturity and quality.

the gap method or maturity ladder is based on a comparison of active and passive balance sheet items, taking into account the period remaining until their maturity. bill endorsement deficit liquidity

One of the methods widely used for quantitative assessment of business risks is the analysis of the financial condition of an enterprise (firm). This is one of the most accessible methods of relative risk assessment, both for the entrepreneur, the owner of the enterprise, and for his partners.

The financial condition of an enterprise is a complex concept characterized by a system of absolute and relative indicators that reflect the availability, allocation and use of the enterprise's financial resources and together determine the sustainability of the enterprise's economic position and its reliability as a business partner.

From the point of view of assessing the level of business risk in the system of indicators characterizing the financial condition of enterprises, solvency indicators are of particular interest.

Solvency is understood as the readiness of an enterprise to repay debts in the event of simultaneous presentation of demands from all creditors of the company for payments on short-term obligations (for long-term ones - the repayment period is known in advance).

The use of solvency indicators makes it possible to assess at a specific point in time the readiness of an enterprise to pay creditors for priority (short-term) payments with its own funds.

The main indicator of solvency is the liquidity ratio.

The solvency of a bank depends on many factors. The Central Bank sets a number of conditions that banks must fulfill to maintain their solvency. The most important of them: limiting the bank’s liabilities, refinancing banks by the Central Bank, reserving part of the bank’s funds in a correspondent account with the Central Bank.

The risk of insolvency may well lead to bank bankruptcy. The severity of bankruptcy risk is assessed by the value of the corresponding probability. If the probability is small, then it is often neglected. Of course, the probability of bankruptcy is non-zero in almost any transaction due to very unlikely catastrophic events in financial markets, on a national scale, due to natural phenomena, etc., however, bankruptcies do occur. Another thing is what their reason is, who needs it, who allowed it.

In the practice of financial solvency analysis, several liquidity ratios are used depending on the purpose and goals of the analysis. They are used to assess whether a firm is able to cover the costs of its short-term obligations or pay its bills and remain solvent.

The absolute liquidity ratio (Cal) characterizes the degree of mobility of an enterprise’s assets, ensuring timely payment of its debt, and is determined from the expression:

where St is the cost of highly liquid funds (cash in banks and cash desks, securities, deposits, etc.); Т0 -- current liabilities of the enterprise (the amount of short-term debt).

The current liquidity ratio (K) shows the extent to which current needs are covered by the enterprise’s own funds, without attracting loans from outside, and is determined from the expression:

Ktl = St + Ss

where C is the cost of medium liquidity assets (inventories, accounts receivable, etc.).

Critical Evaluation Quotient (or Litmus Test Quotient)

CCO = Cash + Accounts Receivable

Short-term liabilities

with the help of which only the most liquid current assets are valued: cash and marketable securities.

The given indicators (their calculated values) can serve as a guide for assessing the financial condition of the enterprise in comparison with standard values.

For example, theoretically, the absolute liquidity ratio should be equal to or greater than one. However, given the low probability that all creditors of an enterprise will simultaneously present debt claims to it, in practice the value of this coefficient may be significantly lower. In countries with developed market economies, it is considered normal if the value of the absolute liquidity ratio is not lower than 0.2 -0.25.

In the practice of developed countries, the standard value of the current liquidity ratio for various industries ranges from 2.0 to 2.5, i.e. The optimal need for liquid funds of an enterprise should be at a level where they are approximately twice the short-term debt. The daily work of a commercial bank in managing liquidity is aimed at the bank’s self-preservation, the condition of which is the uninterrupted fulfillment of obligations to clients. From an organizational point of view, it presupposes compliance with the ratios of individual groups and items of liabilities and assets of the balance sheet, recorded in certain indicators. Such indicators are divided into external and internal.

For a commercial bank, the general basis of liquidity is ensuring the profitability of production activities (operations performed). At the same time, the peculiarities of its work as an institution that bases its activities on the use of client funds dictate the need to use specific liquidity indicators.

Although the general and specific liquidity of a commercial bank complement each other, the direction of their action is mutually opposite. Maximum specific liquidity is achieved by maximizing balances in cash registers and correspondent accounts in relation to other assets. But it is in this case that the bank’s profit is minimal. Maximizing profits requires not holding funds, but using them to make loans and make investments. Since this requires reducing cash and correspondent account balances to a minimum, maximizing profits threatens the uninterrupted fulfillment of the bank’s obligations to clients.

Carrying out such work requires appropriate operational information support. The bank must have current information about its available liquid funds, expected receipts and upcoming payments. It is advisable to present such information in the form of schedules of receipts and payments arising from accepted obligations for the corresponding period (decade, month, etc.). It is the basis for considering a package of loan proposals for a given period.

The banking management mechanism that ensures the implementation of the specified target function has significant features. Traditionally, like any commercial enterprise, profit maximization is achieved by increasing revenue receipts and reducing costs. However, the content of these indicators is specific for commercial banks. They do not include the total (gross) turnover of bank revenue, but only that part of it that ensures the formation and use of profit.

The main element of turnover - the issuance and repayment of loans - is regulated in accordance with the laws of movement of the loaned value. The bank's gross profit depends on the size of the funds lent and their price, i.e. interest rates. The effect of each factor, in addition to the natural influence of market conditions, depends on the specific requirements for ensuring liquidity.

The amount of credit investments of a commercial bank is determined by the volume of its own and borrowed funds. However, in accordance with the principles of bank regulation, the entire amount of these funds cannot be used for lending. Therefore, the bank’s task is to determine the amount of effective resources that can be directed to credit investments.

Liquidity risk is closely related to the value of liquidity ratios. Liquidity risk is associated with possible financial losses in the process of transforming securities or other inventories into cash necessary for the timely fulfillment of the company's obligations or when changing the strategy and tactics of investment activities.

Financial losses during the transformation of resources include: depreciation of liquid funds; partial loss of capital in connection with the sale of an unfinished construction project; sale of certain securities during periods of low quotation; taxes and fees, payment of commissions to intermediaries, etc. payments made in the process of liquidation of investment objects, etc.

Thus, the lower the liquidity of the investment object, the higher the possible financial losses in the process of its transformation into cash, the higher the risk.

The purpose of liquidity management is to ensure the Bank's ability to timely and fully fulfill its monetary and other obligations arising from transactions using financial instruments.

Liquidity management is also carried out for the purposes of:

· identifying, measuring and determining an acceptable level of liquidity;
· determining the Bank's need for liquid funds;
· constant monitoring of liquidity status;
· taking measures to maintain liquidity risk that does not threaten the financial stability of the Bank and the interests of its creditors and depositors;
· creating a liquidity management system at the stage of a negative trend emerging, as well as a system for quick and adequate response aimed at preventing liquidity from reaching critical levels for the Bank (minimization).

In the process of liquidity management, the Bank is guided by the following principles:

· liquidity management is carried out daily and continuously;
· the methods and tools used for assessing liquidity risk should not contradict the regulatory documents of the Central Bank of the Russian Federation and risk management policies;
· The Bank clearly divides powers and responsibilities for liquidity management between management bodies and divisions;
· limits are established to ensure an adequate level of liquidity and appropriate to the size, nature of the business and financial condition of the Bank;
· information about future receipts or write-offs of funds from departments is immediately transferred to the Organizational and Control Department;
· when making decisions, the Bank resolves the conflict between liquidity and profitability in favor of liquidity;
· every transaction affecting liquidity must be taken into account in calculating liquidity risk. When placing assets in various financial instruments, the Bank strictly takes into account the urgency of the source of resources and its volume;
· large transactions are analyzed in a preliminary manner for their compliance with the current state of liquidity and established limits;
· planning of the need for liquid funds is carried out.

Liquidity management methods.

To assess and analyze the risk of liquidity loss, the Bank uses the following methods:

· coefficient method (normative approach);
· method of analyzing the gap in the maturity of claims and obligations with the calculation of liquidity indicators: liquidity excess/deficit, liquidity excess/deficit ratio;
· cash flow forecasting.

The coefficient method includes the following steps.

Stage 1: calculation of the actual values of the mandatory ratios of instant (N2), current (N3) and long-term liquidity (N4) (together in the text of these Regulations are referred to as liquidity ratios) and their comparison with the permissible numerical values established by the Bank of Russia. Liquidity ratios are calculated daily on an ongoing basis.
Stage 2: analysis of changes in actual values of the liquidity level in relation to the calculated standards for the last 3 months (dynamics of liquidity standards).

In the process of liquidity risk management, the following liquidity limits are established:

current liquidity limit in the form of an absolute amount - the maximum size of the liquidity deficit (the excess of liabilities over assets)

prospective liquidity limit in the form of a relative indicator: the marginal liquidity deficit ratio, which is the ratio of the liquidity deficit on an accrual basis and the bank’s assets

As a current liquidity limit, a maximum amount of liquidity deficit is usually set for a period of up to 1 month. Maintaining the limit is ensured by calculating the volume of non-performing assets (correspondent account and cash desk), which should ensure settlements for demand funds and urgent funds.

The prospective liquidity limit is an aggregate indicator - the maximum liquidity deficit ratio.

The bank's strategy in the field of asset and liability management directly affects the planning of liquidity risk and corresponding limits. The size of the limit is determined by the bank's liquidity policy - conservative or aggressive. In the first case, there is no current liquidity deficit and the limit is equal to 0. In the second case, it should be equal to the volume of possible attraction of funds in the interbank lending market and the volume of funds from the sale of highly liquid assets.

The conservatism of the bank's policy presupposes the absence of a gap between assets and liabilities within one term group or placement for periods shorter than the terms of attracted liabilities. In this case, the prospective liquidity limit will be close to 0. An aggressive policy involves increasing the prospective liquidity limit, that is, increasing the framework within which the maturities of assets can exceed the maturities of liabilities. According to experts, the upper limit of deviations should be such that by the time the term group “up to 1 month” is reached, the gap is within the current liquidity limit.

Practical part

Task: The investor deposited 100 thousand rubles into a deposit account. After two years, the deposit amount was 120 thousand rubles. Determine the annual simple interest rate.

i =(S/P-1)/n or i =(S/P-1)/n*100

i=(120 thousand rubles /100 thousand rubles -1)/ 2 years =0.1 or 10% per annum.

Answer: 10% per annum.

Simple interest is used to increase interest when issuing a loan for a period of up to 1 year or when interest is not added to the principal amount of the debt, but is paid periodically.

To write the simple interest formula, we use the following notation:

I - the amount of funds accrued on the original amount with interest for the entire period (the amount with interest is the original amount)

P - initial amount of debt (deposit)

S -- amount at the end of the term (initial amount + interest amount)

i - interest rate, decimal fraction. For example, if the interest rate is 20%, then in calculations you need to use 0.2 = 20%/100

n - loan term in years

Formula for interest accrued over the entire term

Simple interest formula

S=P+I=P+Pni=P(1+ni) (II)

Calculation of the initial amount of debt using the simple interest formula

P=S/(1+ni) or P=S/(1+ni/100), if i is measured in % (III)

Calculating the annual interest rate using the simple interest formula

i=(S/P-1)/n or i=(S/P-1)/n*100, if you need to get the interest rate (IV)

Calculating the loan term using the simple interest formula

On August 30, during the Central Bank’s weekly deposit auction, banks placed 220.8 billion rubles. excess liquidity at 10.41% per annum with an established limit of 280 billion rubles. 76 credit institutions from 35 regions of the country took part in the auction. The previous auction took place on August 9. As part of it, the Central Bank attracted 100 billion rubles from banks. The weighted average interest rate was 10.22%. 62 banks participated in the auction, and their offers exceeded the Central Bank limit (100 billion rubles) almost twice, amounting to 187 billion rubles.

The need to hold deposit auctions, according to a press release from the Bank of Russia, is due to the influx of liquidity into the banking sector through the budget channel and the need to support short-term money market rates near the key rate of the Bank of Russia.

Over the course of the year, the Central Bank expects a transition from a liquidity deficit in the banking system to its sustainable surplus. According to the Central Bank, a structural liquidity surplus in the banking sector of the Russian Federation may occur as early as November - December 2016, and the volume of the surplus, according to preliminary estimates, at the end of the year may amount to about 1 trillion rubles. Thus, this trillion will not go into the economy, but will be absorbed by the Bank of Russia in one way or another.

The regulator cites the Ministry of Finance's use of the Reserve Fund to finance the federal budget deficit as the main reason leading to the emergence of a liquidity surplus.

This year, according to the Ministry of Finance, the federal budget deficit is expected to be more than 3% of GDP, and the Reserve Fund, the funds of which are used to cover the deficit, may be exhausted by the end of this year (as of August 1, it contained 2.56 trillion rubles. , or $38.18 billion).

However, it is obvious that with adequate monetary and regulatory policies, a liquidity surplus should not arise - “extra” money is transformed into loans to the population and business. And in this case, the problem is that the banking system has ceased to meet the needs of the economy.

In particular, the main reasons for the liquidity surplus are as follows. Firstly, this is an excessively high level of real interest rates in the economy due to the overestimation of the key rate of the Bank of Russia (currently it is 10.5%). Taking into account the Bank of Russia's forecast for inflation (less than 5% in July 2017), the real interest rate, included only in the key rate of the Bank of Russia, is about 6-7% (for business loans - even higher), which is an extremely high level according to any criteria both for Russia and for other countries. By setting such a level of real interest rate, the Bank of Russia makes it extremely unprofitable for borrowers to attract loans.

Secondly, loan rates do not correspond to profitability indicators in many sectors of the economy, especially in the manufacturing industry. In particular, in the economy as a whole, the level of profitability of goods, works, and services sold at the end of 2015 was 9.3%, in the production of machinery and equipment - 8.2%, in construction - 5.4%. For comparison, the weighted average level of interest rates on loans to non-financial organizations for a period of more than one year is about 14% per annum.

Thirdly, the Central Bank is constantly tightening banking regulation, including the transition to Basel III standards. This leads to increased requirements for banks to secure loans from borrowers. At the same time, during a crisis, the size and quality of collateral objectively decrease.

Thus, a liquidity surplus is formed in conditions of extremely low availability of credit resources for business. In the current conditions (also aggravated by a drop in domestic demand, including for the same reasons), business prefers to refuse to implement investment projects, and the economy is losing potential growth drivers.

As a result, a situation arises where business becomes a net creditor of the banking system, and not vice versa. Thus, in the second quarter of 2016, a situation was observed where an increase in the volume of deposits of legal entities in banks occurred against the background of a significant reduction in their debt to banks. Deposits increased during the quarter by 84 billion rubles, and the volume of debt decreased by 1,149 billion rubles, that is, the net debt of non-financial organizations to banks decreased by more than 1.2 trillion rubles. Accordingly, a liquidity surplus is formed in this way - through the withdrawal of funds from business into the banking system. And the placement of these funds in the Central Bank will complete the process of their withdrawal from circulation.

But economic recovery requires a search for new growth drivers relying on domestic sources.

At the same time, it is necessary to overcome such structural limitations as a high degree of depreciation of fixed assets, a low renewal rate, and a lack of infrastructure. However, modernization requires expanded investment, which is only possible with available credit resources.

Tight monetary and regulatory policies of the Central Bank lead to the opposite effect. Achieving low inflation will achieve nothing if the response to any inflation risks is to “suffocate” investment activity. A failure in investment will only ensure a growing gap in the level of labor productivity and product competitiveness with leading countries.

Accordingly, the expectation of a liquidity surplus should force the Central Bank not to introduce instruments to absorb it, but, on the contrary, to use all available means to prevent a sustainable liquidity surplus. The key rate should be significantly reduced - to a level that meets the needs of the economy and ensures the implementation of investment projects and the development of production.

The Bank of Russia is overly focused on achieving its own inflation target and is ready to sacrifice other indicators of economic development. Thus, press releases from the Bank of Russia often use wording that the slowdown in consumer price growth will be facilitated by weak demand, including under the influence of a “moderately tight monetary policy.”

Moreover, in May 2016, one of the Bank of Russia’s materials clearly stated: “To achieve the inflation goal declared by the Bank of Russia, it is necessary to slow down the growth rate of a wide range of internal economic indicators.” Thus, in fact, the Bank of Russia not only recognizes its role in the contraction of the Russian economy, but also shows its interest in low development indicators.

Following the July meeting of the board of directors, at which it was decided to leave the key rate at 10.5% per annum, the Central Bank stated that “real interest rates in the economy (taking into account inflation expectations) will remain at a level that will ensure demand for credit that does not lead to to increase inflationary pressure, and will also maintain incentives to save.”

In other words, rates will remain high so as not to “accelerate” consumer lending and lending to the real sector. Now an industrial enterprise can take out a loan at 10-15%, the interest on consumer loans is 16-33% per annum, while the current inflation is 7.2%, the expected inflation at the end of the year is 5-6%.

Earlier, in one of the materials of the Central Bank it was directly stated: “To achieve the inflation goal declared by the Bank of Russia, it is necessary to slow down the growth rate of a wide range of internal economic indicators.”

The latest report of the Central Bank “Financial Review: conditions for conducting monetary policy” states that the regulator expects the banking system to transition to a “structural liquidity surplus” at the beginning of 2017 due to the financing of the budget deficit from the Reserve Fund. Therefore, the Central Bank’s press release was entitled quite eloquently: “The expected transition to a structural liquidity surplus will not contribute to the easing of monetary conditions.”

As has already been emphasized, the Central Bank is not consciously going to take any steps to stimulate lending. On the contrary, it absorbs the resulting liquidity using various instruments - selling government bonds to banks, placing “extra” funds on its deposits, etc.

The Bank of Russia does not plan to develop special mechanisms for refinancing banks lending to investment projects. As an argument, the regulator refers to the fact that the current limits on specialized refinancing instruments have not been selected. But this is not surprising, given the level of interest rates on these instruments.

The rate has remained unchanged since the end of 2014 and, despite the processes taking place in the economy, is fixed at 9% per annum. At the same time, attracting financial resources to implement investment projects for up to three years with expected inflation in a year of 4-5% makes these instruments unattractive. Entrepreneurs will prefer to take an investment pause (which has already been delayed), waiting for interest rates to begin to correspond to the macroeconomic situation.

In contrast to the instruments of the Bank of Russia, government financial support programs that involve a lower cost of financial resources do not have problems with applications. For example, the Industrial Development Fund, whose programs provide for the provision of loans at an annual rate of 5%, in 2015 received 1,282 applications for financing totaling 449 billion rubles.

Of these, 74 projects were approved with a total amount of borrowed funds of 24.6 billion rubles. According to the fund, the total budget of these projects (taking into account previously invested funds and other sources of financing) is more than 90 billion rubles. A similar situation with a significant number of applications for financial and guarantee support is observed within other institutions and development programs at the federal and regional levels.

The high demand for programs of development institutions necessitates their additional capitalization at the expense of the budget. Thus, for 2016 it is planned to increase the capital of the Industrial Development Fund in the amount of 20 billion rubles.

In general, the policy of the Bank of Russia largely torpedoes the efforts to get out of the recession that the Russian government is making. In particular, an anti-crisis action plan has been adopted. It provides for the expansion of the activities of development institutions (Industrial Development Fund, Roseximbank, Russian Export Center, SME Corporation, etc.) providing financial and other support to promising projects with export potential, an innovative component, and the potential to create high-performance jobs.

Along with this plan, it is envisaged to implement a number of “sectoral” programs aimed at mitigating the consequences of a large-scale drop in domestic demand and a shortage of available borrowed funds. These programs include a program to support the automotive industry, agricultural machinery, light industry, and a program to support mortgage lending.

In addition, the authorities subsidize the cost of paying interest on loans as part of state programs to support the most important sectors of the economy (agricultural support program, automotive development program, Housing program, etc.). In 2016, it is planned to provide about 95 billion rubles from the federal budget. subsidies to compensate for part of the cost of paying interest on loans.

In some markets, government subsidized lending programs make a critical contribution to supporting demand. Last year, loans with state support accounted for about a third of the volume of issued mortgage loans, for which more than 10 million square meters were purchased. m of housing.

According to market participants, in 2016, a significant portion of residential real estate purchases (50-80% for various projects) on the primary market are also carried out within the framework of this program. In the car lending market in 2015, the share of loans under the state support program was about 35%.

But we must admit that the possibilities of budgetary support for industry are very limited.

The authorities are forced to abandon indexing pensions, public sector salaries and social payments to inflation, which has an extremely negative impact on household incomes and consumer demand.

For example, there will be no second indexation of pensions this year; instead, at the beginning of next year, all pensioners will be paid a lump sum of 5 thousand rubles.

Numerous experts (Stolypin Club, Institute of Economic Forecasting of the Russian Academy of Sciences, Financial University under the Government, etc.) believe that in conditions of recession and budgetary restrictions, the Bank of Russia should soften its monetary policy, as well as develop and offer to the economy (primarily the real sector) specialized mechanisms for financing the investment process.

Meanwhile, the Central Bank takes an irreconcilable position, de facto emphasizing in almost every official statement that it is ready to sacrifice economic growth in order to reduce inflation to 4% by the end of 2017.

The next meeting of the Board of Directors of the Central Bank on the key rate and monetary policy will be held on September 16. Most likely, the regulator will keep the rate at the same level or symbolically reduce it (to 10%). At the same time, all other parameters of the Central Bank’s policy will remain unchanged, analysts predict. Thus, the transition to the beginning of the active phase of economic recovery in Russia will again be postponed indefinitely.

During the acute phase of the crisis, many market participants entrusted their funds to foreign banks for management. Chairman of the Board of Deutsche Bank Jörg Bongartz spoke about how the financial and credit organization managed to cope with the sharp influx of liquidity, as well as how the “basket” of income changed in the post-crisis period.

Some market participants note that today there is a problem of excess liquidity. Do you agree with this opinion?

Banks gradually returned more expensive sources of liquidity to the Central Bank and replaced them with cheaper ones. For example, retail banks, by attracting funds from the public, were able to significantly increase their assets in a short period of time. And at the moment we believe that approximately 25% of assets in the banking sector are liquid. This is a very high ratio: before the crisis - 15%. However, this is due to several reasons. First, Russian banks have historically held more liquidity than their foreign counterparts. This is due to the fact that in Russia it has not been possible to solve the problem of the lack of “long-term” resources; credit institutions cannot agree with depositors on the placement of funds for the long-term period. In conditions of high volatility, banks are forced to hedge and hold more liquidity in their accounts.

Secondly, lending is recovering very slowly due to the existence of high market risks in the country and the world. Today, banks prefer to work with a narrow range of high-quality borrowers. And borrowers, in turn, both legal entities and individuals, try to “live” within their means and reduce the amount of borrowing. These two factors constrain the growth of the loan portfolio.

However, as statistics show, basic economic indicators are improving and the situation is stabilizing. The official figures are also confirmed by our clients, who note an increase in investor activity in the Russian market. The change in “mood” also affects the activities of our bank: the volume and number of settlement transactions, “domestic” and international, are increasing.

We must not forget that during the crisis, companies themselves accumulated quite a lot of liquidity by reducing their activity, cutting production and expenses, and postponing investment programs. As a result, companies in the oil and gas sector, for example, have created a large “cushion” of financial security and now do not need borrowed funds.

- Do you have excess liquidity in your bank?

In the fourth quarter of 2008, a lot of clients, old and new, brought their liquidity to our bank. It was an extreme time, and commercial organizations were looking for tools to preserve their funds, trying to create a safety net in case financial markets closed.

We did not limit the flow of funds, regarding the current situation as a chance to expand our market share. At the same time, we realized that such a policy could subsequently cost us dearly, because it is not enough to accept funds - it is also necessary to adequately allocate them. Now we understand that we made the right decision.

Our main influx of liquidity came from our partner banks, which placed their funds with us. It is worth noting that at that time we could offer them a minimum margin tending to zero. However, even under such conditions they were ready to place funds with us, because there was a lot of negative news coming from the market, even from the world’s largest banks. And many considered our bank as a “safe haven”.

As for the corporate sector, the situation developed in almost the same way: the treasurers of large industrial corporations, as a rule, placed free liquidity with three or four partner banks. At the same time, many enterprises were even ready to place foreign currency deposits without interest.

- In your opinion, is excess liquidity dangerous?

Liquidity shortages can be corrected by injecting government resources into the banking system. It is much more difficult to get rid of excess liquidity.
In theory, in the event of excess liquidity, banks should begin to reduce interest rates on loans. Thus, the balance between supply and demand is restored and the volume of liquidity in the market is optimized. If the problem of excess liquidity extends over a long period of time, this means that market self-regulation mechanisms do not work. That is, banks produce too much liquidity that they are unable to adequately allocate. Until market participants manage to get rid of their “nervousness” and until they reach mutual understanding, market mechanisms will not turn on.

Answering the first question, I will say that due to the existence of excess liquidity and lower interest rates, the profitability of the banking business is declining. As I already said, excess cash leads to lower lending rates, and accordingly, interest income of banks falls. However, this income item can be offset by an increase in commission payments. For example, Deutsche Bank now generates a significant part of its profit by increasing the number and volume of settlement transactions and expanding its product line.

That is, if banks do not find effective mechanisms for making money, then at the end of the year they may show a negative result?

It cannot be ruled out that some banks will end the year in the red. Although I do not think that because of this the consequences for the banking system as a whole or for individual banks will be very serious.

Now the demand for lending is growing. There are many companies on the market that want to get a loan, but cannot. First of all, these are representatives of small and medium-sized businesses, third-tier companies. Banks are still prevented from using this “resource” by the high risks that I have already mentioned.

- Do you notice increased competition in the banking market?

Competition is increasing, but customers still prefer not to take risky actions and choose reliability. Those clients who came to us during the acute phase of the crisis still remain with us. True, if previously their funds were placed in two or three large banks, today the number of partners has increased to five to ten. This is a normal situation.

However, we must actively compete with other banks. But we must compete not for liquidity (as I already said, we have super-liquidity, and it is unprofitable for us), but for customer service.

Some companies are trying to repay expensive loans received during the crisis ahead of schedule. Doesn't this phenomenon aggravate the situation of shortage of quality borrowers?

Indeed, this trend is observed in both domestic and international markets. However, the borrower cannot always (or it is not always beneficial for him) to repay an expensive loan ahead of schedule, since lenders in most cases provided for such a possibility in the agreement and set fairly strict conditions. Therefore, negotiations are ongoing, but this phenomenon has not yet become widespread.

- What are your forecasts for 2010? What financial results do you expect based on its results?

If we talk about the results of the first months, then due to the stabilization of the market situation, large transactions began to be concluded, which practically did not happen last year. The second positive phenomenon for the bank is the expansion of our share in the commercial banking services market. I expect the bank's fee income to rise this year.

In addition, operations in global foreign exchange markets, risk hedging instruments, and structural solutions that we offer to our clients also bring good profits. I note that when uncertainty grows in the market, our profitability in this sector increases, because clients want to insure themselves against fluctuations in interest rates and currency risks.

It is too early to say what the effect of interest rates will bring by the end of the year. Much depends on how the situation develops in the second half of the year. However, already in the first half of the year, our margin decreased by almost half compared to the pre-crisis level.
If in 2010 the profitability is lower than in 2009, then this difference will be quite insignificant. It is worth noting that 2009 was quite productive for us.

Liquidity hit margins. // Veronika Soshina, "National Banking Journal", No. 7 (74), July 2010

Jörg BONGARTZ: If the problem of excess liquidity extends over a long period of time, it means that market mechanisms are not working

During the acute phase of the crisis, many market participants entrusted their funds to foreign banks for management. Chairman of the Board of Deutsche Bank Jörg BONGARTZ spoke about how the financial and credit organization managed to cope with the sharp influx of liquidity, as well as how the “basket” of income changed in the post-crisis period.

NBJ: Some market participants note that today there is a problem of excess liquidity. Do you agree with this opinion?

J. BONGARTZ: Banks gradually returned more expensive sources of liquidity to the Central Bank and replaced them with cheaper ones. For example, retail banks, by attracting funds from the public, were able to significantly increase their assets in a short period of time. And at the moment we believe that approximately 25% of assets in the banking sector are liquid. This is a very high ratio: before the crisis - 15%. However, this is due to several reasons. First, Russian banks have historically held more liquidity than their foreign counterparts. This is due to the fact that in Russia it has not been possible to solve the problem of the lack of “long-term” resources; credit institutions cannot agree with depositors on the placement of funds for the long-term period. In conditions of high volatility, banks are forced to hedge and hold more liquidity in their accounts.

NBJ: Do you have excess liquidity in your bank?

J. BONGARTZ: In the fourth quarter of 2008, a lot of clients, old and new, brought their liquidity to our bank. It was an extreme time, and commercial organizations were looking for tools to preserve their funds, trying to create a safety net in case financial markets closed.

NBJ: Is excess liquidity dangerous, in your opinion?

J. BONGARTZ: Liquidity shortages can be corrected by injecting government resources into the banking system. It is much more difficult to get rid of excess liquidity.

In theory, in the event of excess liquidity, banks should begin to reduce interest rates on loans. Thus, the balance between supply and demand is restored and the volume of liquidity in the market is optimized. If the problem of excess liquidity extends over a long period of time, this means that market self-regulation mechanisms do not work. That is, banks produce too much liquidity that they are unable to adequately allocate. Until market participants manage to get rid of their “nervousness” and until they reach mutual understanding, market mechanisms will not turn on.

NBJ: That is, if banks do not find effective mechanisms for making money, then at the end of the year they may show a negative result?

J. BONGARTZ: It cannot be ruled out that some banks will end the year in the red. Although I do not think that because of this the consequences for the banking system as a whole or for individual banks will be very serious.

NBJ: Do you notice increased competition in the banking market?

J. BONGARTZ: Competition is increasing, but customers still prefer not to take risky actions and choose reliability. Those clients who came to us during the acute phase of the crisis still remain with us. True, if previously their funds were placed in two or three large banks, today the number of partners has increased to five to ten. This is a normal situation.

However, we must actively compete with other banks. But we must compete not for liquidity (as I already said, we have super-liquidity, and it is unprofitable for us), but for customer service.

NBJ: Some companies are trying to repay expensive loans received during the crisis ahead of schedule. Doesn't this phenomenon aggravate the situation of shortage of quality borrowers?

J. BONGARTZ: Indeed, this trend is observed both in the domestic and international markets. However, the borrower cannot always (or it is not always beneficial for him) to repay an expensive loan ahead of schedule, since lenders in most cases provided for such a possibility in the agreement and set fairly strict conditions. Therefore, negotiations are ongoing, but this phenomenon has not yet become widespread.

NBJ: What are your predictions for 2010? What financial results do you expect based on its results?

J. BONGARTZ: If we talk about the results of the first months, then due to the stabilization of the market situation, large transactions began to be concluded, which practically did not happen last year. The second positive phenomenon for the bank is the expansion of our share in the commercial banking services market. I expect the bank's fee income to rise this year.

If in 2010 the profitability is lower than in 2009, then this difference will be quite insignificant. It is worth noting that 2009 was quite productive for us.

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Jörg Bongartz: “If the problem of excess liquidity extends over a long period of time, it means that market mechanisms are not working. Bank liquidity is the bank’s ability to ensure full and timely fulfillment of its financial obligations

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