The decision follows repeated outbursts from some of Russia’s most powerful industrialists, whose businesses have been squeezed hard by the sharp rise in rates this year. Their protests appeared to have finally made an impression in the Kremlin, which had until now consistently supported Nabiullina’s efforts, mindful that its heavy spending on the war in Ukraine has driven the economy to overheat.
At a four-and-a-half hour press conference on Thursday, President Vladimir Putin had said he’d met with Nabiullina recently and hoped that the CBR would take a “balanced” decision this week.
Nabiullina said the change of stance reflected a slowdown in lending, at the end of a year in which it has boomed due to government mortgage subsidies and a sharp increase in real wages that has made more people creditworthy. Her deputy Alexey Zabotkin said that data over the last six weeks suggest it’s “quite possible” that policy is now tight enough to bring inflation down.
Nabiullina indicated that the CBR would in future rely less on interest rates and more on prudential policy tools to keep lending at sustainable levels. Earlier this week, the CBR said it expects corporate lending to rise as much as 20 percent this year, while unsecured consumer lending is expected to rise 18 percent. Both have shown signs of slowing a little since the CBR’s last meeting, however.
“To avoid an extraordinary accumulation of risks, we are raising capital and liquidity requirements for banks,” news agency Interfax quoted her as saying. “This policy will be pursued to improve the resilience of the financial sector, and it won’t depend on the level of the key rate.”
The CBR has recently increased capital charges for banks lending to big business, forcing them to set aside more cash to cover any potential rise in bad loans. However, it has also delayed by six months a requirement that would have forced all banks to keep more liquid assets as a general precautionary measure.
Analysts point in particular to the risk of a crash in the real estate sector next year: Now that the government has stopped subsidizing new mortgage loans, developers’ apartment sales have fallen off sharply, which will crimp their ability to service the massive debts they have run up over the last couple of years.
Russia’s biggest listed real estate developers, such as LSR, Etalon and PIK, have lost as much as half their market value since the middle of the year. Their shares all rose sharply in Moscow trading in response to Friday’s announcements, however.
