NBB views increasing sanctions pressure, instability of banks’ resource base as main threats to financial stability
<p> MINSK, Aug 2 - PrimePress. The National Bank of Belarus (NBB) considers the increasing sanctions pressure and instability of banks’ resource base as major threats to the country’s financial stability. </p> <p> Head of the Financial Stability Department of the National Bank, Igor Mogilevich, stated that in his report presented at the extended session of the NBB Board on July 29, 2021. The report is published on the website of the National Bank. </p> <p> </p> <p> Mogilevich says that Belarus’ financial sector has been operating under stressful conditions for more than five quarters. “Among the main threats to financial stability in 2021 are increasing sanctions pressure and instability of banks’ resource base,” reads the report. </p> <p> </p> <p> “The possible deterioration of external trade and economic relations and the country’s investment climate under the impact of sanctions has a negative impact on financial stability in the country. And this impact to date is more related to the uncertainty of expectations of economic agents than is reflected in the actual results of foreign economic activity in the first half of 2021,” said Mogilevich. </p> <p> </p> <p> He reminded that in January-May 2021 the surplus of the foreign trade in goods and services in Belarus amounted to $1.2 billion which is 2.3 times more than in January-May 2020. </p> <p> </p> <p> More realistic in the current environment is the threat of deposit outflows from banks. “This creates increased pressure on banks’ liquidity and significantly limits banks' ability to lend support to the economy,” the report said. </p> <p> </p> <p> The report states that funds of individuals and legal entities form the basis of the resource base of banks. As of July 1, 2021 the share of funds of individuals and legal entities in the liabilities of banks was 51.7%. However, in January-June 2021, deposits of individuals and legal entities decreased by Br1.7 billion ($680.081 million at the rate of National Bank of Belarus), or 3.8%. “The greatest vulnerability to negative factors was demonstrated by fixed-term FX deposits of individuals. Their value decreased by 13.4% over the six months. The dynamics of fixed-term ruble deposits of individuals was also unstable, but an increase of 1.6% was registered as of July 1, 2021,” the report says. </p> <p> </p> <p> At the same time, according to Mogilevich, the situation in the deposit market is gradually improving. “In order to improve the capacity of banks to counteract the outflow of deposits, the National Bank decided to suspend the recommendations limiting interest rates on foreign currency deposits of individuals from June 18, 2021. The measures taken increased the banks’ capacity to adapt to the unfolding situation. The latest data testifies that the rate of outflow of the fixed-term FX deposits of individuals is slowing down, while the outflow of fixed-term Br deposits of individuals has stabilized,” reads the report. </p> <p> </p> <p> Mogilevich says a high proportion of irrevocable deposits in the structure of fixed-term personal deposits contributes to the stability of the deposit market: 87.1% - for Br deposits and 64.4% - for FX deposits as of July 1, 2021. </p> <p> </p> <p> In addition, the most important factor was the National Bank’s support of bank liquidity, which replaced the outflow of deposits, allowing the banking system “under the conditions of an unstable resource base” to provide continuous credit financing for the real economy. </p> <p> </p> <p> According to the report, the amount of loans to legal entities increased by 1.2% year on year to Br41.3 billion ($16.521 billion; $1-$2.4997) in January-June 2021, which includes loans to manufacturing industries in the amount of Br19.9 billion ($7.96 billion), agricultural enterprises - about Br1 billion ($400.048 million). </p> <p> </p> <p> The share of banks’ non-performing assets in assets subject to credit risk stood at 5% as of July 1, 2021 (target - not more than 10%). End </p> <p> </p>
2021-08-03
Primepress
NBB views increasing sanctions pressure, instability of banks’ resource base as main threats to financial stability
MINSK, Aug 2 - PrimePress. The National Bank of Belarus (NBB) considers the increasing sanctions pressure and instability of banks’ resource base as major threats to the country’s financial stability.
Head of the Financial Stability Department of the National Bank, Igor Mogilevich, stated that in his report presented at the extended session of the NBB Board on July 29, 2021. The report is published on the website of the National Bank.
Mogilevich says that Belarus’ financial sector has been operating under stressful conditions for more than five quarters. “Among the main threats to financial stability in 2021 are increasing sanctions pressure and instability of banks’ resource base,” reads the report.
“The possible deterioration of external trade and economic relations and the country’s investment climate under the impact of sanctions has a negative impact on financial stability in the country. And this impact to date is more related to the uncertainty of expectations of economic agents than is reflected in the actual results of foreign economic activity in the first half of 2021,” said Mogilevich.
He reminded that in January-May 2021 the surplus of the foreign trade in goods and services in Belarus amounted to $1.2 billion which is 2.3 times more than in January-May 2020.
More realistic in the current environment is the threat of deposit outflows from banks. “This creates increased pressure on banks’ liquidity and significantly limits banks' ability to lend support to the economy,” the report said.
The report states that funds of individuals and legal entities form the basis of the resource base of banks. As of July 1, 2021 the share of funds of individuals and legal entities in the liabilities of banks was 51.7%. However, in January-June 2021, deposits of individuals and legal entities decreased by Br1.7 billion ($680.081 million at the rate of National Bank of Belarus), or 3.8%. “The greatest vulnerability to negative factors was demonstrated by fixed-term FX deposits of individuals. Their value decreased by 13.4% over the six months. The dynamics of fixed-term ruble deposits of individuals was also unstable, but an increase of 1.6% was registered as of July 1, 2021,” the report says.
At the same time, according to Mogilevich, the situation in the deposit market is gradually improving. “In order to improve the capacity of banks to counteract the outflow of deposits, the National Bank decided to suspend the recommendations limiting interest rates on foreign currency deposits of individuals from June 18, 2021. The measures taken increased the banks’ capacity to adapt to the unfolding situation. The latest data testifies that the rate of outflow of the fixed-term FX deposits of individuals is slowing down, while the outflow of fixed-term Br deposits of individuals has stabilized,” reads the report.
Mogilevich says a high proportion of irrevocable deposits in the structure of fixed-term personal deposits contributes to the stability of the deposit market: 87.1% - for Br deposits and 64.4% - for FX deposits as of July 1, 2021.
In addition, the most important factor was the National Bank’s support of bank liquidity, which replaced the outflow of deposits, allowing the banking system “under the conditions of an unstable resource base” to provide continuous credit financing for the real economy.
According to the report, the amount of loans to legal entities increased by 1.2% year on year to Br41.3 billion ($16.521 billion; $1-$2.4997) in January-June 2021, which includes loans to manufacturing industries in the amount of Br19.9 billion ($7.96 billion), agricultural enterprises - about Br1 billion ($400.048 million).
The share of banks’ non-performing assets in assets subject to credit risk stood at 5% as of July 1, 2021 (target - not more than 10%). End