Everytime the state will take $15 out of $100.
The National Bank of Belarus maintains protection of the Belarusian economy from "foreign exchange dirt". June 7 the National Bank Regulator informed that since 1 July 1 2017 that allocations of banks and non-bank financial institutions to the legal reserve (LR) in foreign currency would be increased (from 11% to 15%). This decision, according to the published press release, was adopted with a view to further de-dollarization of the economy.
Striving to make its actions more comprehensive, at the same time the National Bank notified that it stopped issue of new and extension of existing individual permits to insurance companies for settlements in foreign currency under individual insurance contracts that provide for life insurance, incl. additional pension insurance. However, this measure is only a side dish to the piece de resistance - a change in the reservation standard in the LR that "will promote the increased attention to savings in Belarusian rubles."
Should the Belarusian ruble ever become the main national mean not only for payment, but also for saving money raised by hard work? Apparently, yes. But in the very distant future, since there are achievements in this area, but very modest ones.
According to the information of the press release, in May 2017 in the total structure of deposits the share of foreign currency deposits decreased to 69.3% from 75% in May last year. Therefore, the National Bank argues that "the level of dollarization of the national economy of the Republic of Belarus has significantly decreased." At the same time, the data presented in the report indicate that such hard currencies as dollar and euro have been and still are main instruments of people's savings in the country.
But the National Bank also has other pretty good reasons to intensify the process of stripping banks from foreign exchange traditionally kept by the population on deposit accounts. This is necessary in order, first, to maintain a stable channel for the replenishment of state gold and foreign exchange reserves (FER); second, in order to obtain additional foreign exchange resources that are urgently needed to pay off the external debt, as well as for the sake of de-dollarization which makes it possible to increase the manageability of the monetary mass through manipulation of basic interest rates.
The financial dollarization, as is known, has two sides - loans and deposits in foreign currency. And the progress in solving this problem is more noticeable in the field of deposits. The situation with loans, according to the National Bank, is not good. Since the beginning of this year the amount of the banks' currency claims to residents even increased from 55.6% to 56.1% as of May 1. For 4 months the share of toxic assets of banks increased from 12.8% to 14.2% in the total amount of assets. The amount of toxic assets significantly exceeded ruble borrowings of economic entities.
Amid these circumstances, it becomes clear why this time the National Bank has not limited itself by reducing the refinancing interest rate; from June 14 it will be reduced by 1 percentage point - up to 13% per annum. The regulator has decided to use the most crude instrument of the monetary policy - to raise deductions to the LR - to overcome the growth of foreign exchange money supply. In other words, it forcibly takes from banks some of accumulated foreign exchange reserves. Now banks are subject to give the National Bank for free $15 instead of $11.
That's why the rule "the higher the norm of foreign currency reserves, the less such loans are issued by banks" is triggered. While foreign currency loans are getting more expensive for businesses, ruble loans will become cheaper after the reduction of the refinancing interest rate. And let the share of troubled ruble loans today is higher than the currency ones, but currency risks for the banking system with an excess of ruble liquidity will decrease.
There is another good moment for the authorities in this decision. As the increase of allocations to the LR will inevitably cause a reduction in interest rates on currency deposits and an adequate increase in interest rates for legal entities, the interest of banks in state currency bonds will increase. The currency invested by banks in government bonds will be used both to increase the gold reserves and to accumulate additional resources directed to repay the external public debt.
Commercial banks will remain in a clear loss after the fulfillment of increased liabilities - the profitability of their activities will decrease after the increase of deductions to the LR, or, if you like, a kind of tax on a certain type of bank foreign currency liabilities. In this history, the population, namely that part of it which is usually called depositors, simply accidentally got into hot water, as they are key suppliers of foreign currency for banks (more than 30% of passives) and for the state.
If the current power has learned how to attract direct foreign investment or found other significant foreign currency sources apart from population's deposit bank accounts, there, perhaps, would have been no need to increase drastically the legal reserve. It must be confessed that this measure is compulsory because low-skilled authorities of this socially oriented state have failed to satisfy state needs without infringement of banks' and population's interests.
Sergey Zhbanov, Belgazeta