What Does a Sharp Outflow of Funds From Banks Mean for the Belarusian Economy?

The peak in relation to the withdrawal of own funds from banks was August.

The strong outflow of funds from the population is evidenced not only by queues at banks but also by the statistics of the National Bank. Ruble and foreign currency deposits decrease. For example, $ 1.428 billion has been withdrawn from all foreign currency deposits since April.

Most of the money was taken from banks in August. And although this indicator decreased in September, the general trend does not change: people continue to go to banks for their money.

What consequences for the banking system and the country as a whole can result from citizens' persistent desire to refuse the services of financial institutions? The Salidarnasts website asked the senior analyst of Alpari Eurasia Vadzim Yasub.

- In September, Belarusians reduced the number of time deposits in rubles by 1.7%, having withdrawn 77 million. In total, at the beginning of the year, 555 million were withdrawn from time deposits in rubles, having reduced them by 10.8%. Currency is being withdrawn more actively; in September, they took $ 303 million, having reduced time deposits by 5.9%. In total, since the beginning of the year, the outflow of fixed-term foreign currency deposits amounted to $ 1.373 billion, or 22.1%, - the expert cites operational data in an express commentary.

He said that August was the "peak" in terms of withdrawal of own funds from banks. During this month, which has already gone down in history, people took 271 million rubles and 416 million dollars.

Experts explain the distrust of banks not only by a decrease in profitability on deposits but also by fear for the safety of their investments.

- Now, both of these factors play in favor of withdrawing money. Until August, deposit rates were declining, and there were fewer incentives to keep money in the bank.

And in connection with what's going on in the political and legal spheres, fear increases and confidence decreases not only in the banking system but also in the state and all its institutions. It's just that it is more clearly manifested in the attitude to the banking system, - explained Vadzim Yasub.

Now, according to the expert, the banks are faced with the task of balancing the liabilities flowing with the funds of the population with assets. The likelihood that this will lead to the severe restriction of lending, which we have seen in recent years, is not high.

- All this sounds good only in theory. To reduce assets, you need to stop issuing new loans, which is already happening, and the balance should be restored.

But in practice, the deposits have already been taken away, and loans will be returned for years, and this is on condition that they still return, in accordance with the obligations undertaken. But there are many unprofitable state-owned enterprises among the recipients, the expert noted.

In his opinion, other tools to restore the imbalance between assets and liabilities today may not work at all.

- Usually, in this case, they turn to the National Bank as the lender of last resort. But he suspended the issuance of overnight loans, rates on the interbank market increased. Even before the beginning of August, banks could count on loans at 4-5% per annum; now, the rates are about 15%! Money has become more expensive.

After the story with Belgazprombank, the major Russian founders are unlikely to save their subsidiary banks, where at any moment, the Belarusian authorities can come and take everything away.

The downgrade of the country ratings of Belarus and individual banks' ratings are also not in favor of bankers. It is not yet at the level of default in our country, but it is still significant. This means that, all other things being equal, any foreign bank and even a parent bank, purely for formal reasons, will be able to give a strictly limited amount of money, the expert explained.

The inability to refinance, he said, may leave no choice to the authorities and will trigger the printing press.

- Of course, the state will primarily save the state banks, the same Belarusbank, Belagroprombank. But they contain the largest number of problem loans, so support will require huge resources. And it's not very clear where to get them.

Money can be either earned, borrowed, or printed. With our falling economy, we will not be able to make money; no one will give us a loan, except Russia. But it is unlikely to do it all the time. As is known, previous loans are exactly equal to the debts of Belarusian enterprises to Russian entities.

The remaining option to "print money" will inevitably lead to an increase in inflation, devaluation of the Belarusian ruble, and, then, the problem of the largest Belarusian state banks will turn into a problem for all citizens of the country, the financial analyst believes.