Good afternoon, esteemed colleagues!
I am glad to welcome all participants of the forum. Undoubtedly, I will touch upon the issues of technological sovereignty, as they are very important. But if you allow me, in my speech, I will address two topics. The first is our vision of the current situation in the banking sector as a whole. And I would like to raise those problematic issues that we believe are necessary to discuss with you today.
The banking sector contributes to the development of the economy and the investment process, which is developing very dynamically in our country. The banking sector itself also feels confident: there is a large capital reserve, profits, and banks are paying dividends (by the way, one-third of these funds goes to the budget). Part of the profit remains in the capital of the banks, which allows them to increase lending.
The increase in the key interest rate is gradually affecting credit activity, but we are not talking about a halt in lending. Data for July-August and operational data for September show that the overall growth of credit remains significant. However, the impact is uneven across market segments. Comparing it to the second quarter, there is a noticeable slowdown in retail lending, while corporate lending remains very high.
In corporate lending, the year-on-year growth in August was 21.4%, which represents high growth rates. This year, nearly half of the increase in corporate lending is attributed to those segments that are indeed less sensitive to the key interest rate. This includes a significant portion of housing construction projects, financing of already initiated investment projects, and many projects in the machine engineering sector. However, we see significant slowdowns in other segments, which should be the case under a strict monetary policy.
There is noticeable slowdown in the mortgage sector as well. Compared to the first half of the year, mortgage issuances did drop by about half in July-August, decreasing to 350 billion rubles per month. However, this should not be viewed as a dramatic decline. In fact, these are the rates we saw in 2022. Essentially, we are talking about a return to balanced growth rates that will not lead to overheating demand and accelerating growth in housing prices.
If such issuances, like those in July-August, are maintained until the end of the year, then the mortgage portfolio will grow by about 12% by the end of the year. This is the upper limit of the range of lending that we consider to be balanced rates. Therefore, I urge everyone to have a normal attitude towards these rates. We have always said that mortgage growth rates should be balanced.
Consumer lending is supported by the growth of citizens’ incomes and quite confident consumer sentiment. There has also been a slowdown in this segment in July-August. This was influenced by the increase in the key interest rate and the tightening of our macroprudential measures. However, by the end of the year, we also expect quite high growth rates here — 17%. Of course, this is mainly due to the first half of the year, but this is still a high growth rate.
I want to emphasize that from the perspective of monetary policy, and its influence on inflation, what is important for us is not the growth rates in individual segments, but how the overall credit portfolio is growing. The overall growth of credit in the economy must be moderate so that the ability to expand production of goods and services catches up with the demand that has run ahead. There is no other way to achieve low inflation.
Therefore, we raised the rate to 19% in September and do not rule out further increases in October. Yes, in a number of lending segments, and you can see this clearly in banks, the increase in the key interest rate affects less than on purely market ones. Nevertheless, even under these conditions, we can choose a rate trajectory that will lead to us achieving our goal. And we are aimed at reducing inflation to 4% by the end of next year. Therefore, I urge both our respected bankers and entrepreneurs: when you build business plans, you should assume that inflation will decrease and will reach our goal. And do not rely on the idea that the Bank of Russia will meekly agree to elevated inflation in the country.
The good indicators of the banking sector I mentioned give us the opportunity to implement the plans for reforming banking regulation that we had set. Some measures we postponed due to external conditions. But we are returning to these plans, making adjustments, and there are new initiatives. We are ready to do this smoothly, thoughtfully, and deliberately, so that the banking sector can adapt. You know that we discuss all measures. Both yesterday and today, these measures were also discussed. What is the reason that we propose these measures? We all need to think together about increasing the resilience of the banking system. We have gone through recent crises very well because the banking system was resilient. However, we have used many buffers, and of course, we need to keep the resilience standard quite high.
In terms of specific plans, we are focusing on the risk of concentration. Unfortunately, many banks are either at the limit of concentration risk or have certain relaxations. In our view, such relaxations under existing regulations justified themselves in due time, but their significance has been exhausted. And we see that some banks have begun to misuse them. Regulating concentration is very important so that risk in the banking system is evenly distributed and there is diversification of funding sources for large projects. We are often told: we have large borrowers, large companies. Large companies can borrow on the basis of syndicated loans, distributing loans.
Therefore, we will discuss with you how to standardize and unify the rules for participation in syndicates. We have already raised this issue more than once and have begun discussions. It seems to me that we need to come to practical solutions. We are also considering a mechanism for transferring credit risk, such as credit insurance — CDS.
Regarding certain strategic projects, primarily those related to technological sovereignty, as Anatoly Gennadyevich (Ak sakov) mentioned. Of course, we see potential in utilizing state guarantees and the assurances of development institutions. This will also help reduce concentration risks for banks and increase lending to major borrowers.
We see that both the government and businesses are actively developing concession projects, which is also very important for the structural transformation of our economy. And we are discussing with the market a reduction of risk weights for projects within the framework of concessions. In my opinion, this is justified, given that these projects have direct government support.
We still have a few new initiatives. I know that you have already started discussing them on the sidelines of the forum, and I would also like to mention them. The introduction of a currency liquidity standard. For systemically important banks, we will introduce a new national short-term liquidity standard starting in 2026. But this is overall by balance. We are seriously thinking about introducing a currency liquidity standard.
Our currency market has become less deep. And if there is an outflow of short-term currency deposits, and we have seen such cases, then a bank’s exit to the currency market is fraught with significant currency volatility. I have already heard comments from some of our respected bankers that there is no need to tighten this, as banks can manage currency liquidity. But if you can manage it, you should fit within this standard. However, in general, for the market, it is important that the problems that suddenly arise for banks due to the outflow of currency liquidity do not spill entirely into the currency market. Therefore, we will once again think seriously about this standard.
The second initiative is subordinated instruments of a new type. We understand that although there is a capital reserve in banks, they require additional capital. Capital is needed both for the growth of lending and for gradually recognizing losses on blocked assets. By the way, some banks are doing this quite quickly, without relying on these schedules, or have done so completely. But some need time and capital. For some banks, their shareholders cannot provide support, and their profits are insufficient, so they look towards subordinated debt.
What practice shows, by the way, not only in our country: when subordinated debt begins to be counted as capital and is attracted for capital, in stress situations, subordinated instruments unfortunately do not always fulfill this function, the function of covering losses, as capital does, fundamentally the function of capital. And banks do everything to avoid writing off subordinated debt. Why? Because they usually sell it to their large clients, VIPs, and label it as debt. And they do not want to lose relations with these clients later. Essentially, the debt is not written off and is not used as capital. Furthermore, the trigger for writing off is set very low, and by the time there is already an obligation to write off capital, the bank has lost a significant part of its capital.
On the other hand, there is also injustice in this instrument. Because investors who invested in subordinated debt may lose everything upon writing off, while the bank restores its solvency and the shareholder practically loses nothing. This violates the principle of order and responsibility that should exist. In any case, shareholders should take primary responsibility.
Therefore, we plan to improve the rules for issuing subordinated debt, to establish a sufficiently high trigger for converting subordinated debt directly into capital, and to divide subordinated debt into two types.
The first type, which can be purchased by major shareholders of banks — let’s say, with a stake of over 5%. And if such a sufficiently high trigger is breached, this debt must be written off into capital, and this will be an automatic built-in financial recovery instrument for the bank.
The second type of subordinated debt may be available to a wide range of investors. However, write-offs are only possible for the amount needed to restore capital. And when capital is restored and profit appears, this subordinated debt should also be restored. In other words, the investor should then receive essentially the restoration of the debt and coupons. As long as the restoration has not occurred, the bank will not pay dividends to its shareholders or bonuses to management. It seems to me that this will restore fairness in the order of responsibility for the state of the bank.
We intend to publish this concept to discuss it in detail with you. But I would like you to already start considering such possibilities, as there are many details involved.
Another topic I wanted to discuss, which we believe also has a problematic aspect, is mortgages. This concerns both the financial stability of banks and the protection of consumer rights. Both aspects are absolutely critical for us. And we have always spoken about the imbalances caused by mass preferential mortgages. But now this preferential mortgage has not been available for almost three months, and unfortunately, we see various schemes starting to emerge, very creative ones. And the so-called, I stress, so-called preferential rates, options for changing rates, tranche mortgages, options without a down payment, installments transforming into mortgages — a multitude of schemes. Externally, they look very attractive. However, when we analyze them, it all boils down to the inflation of apartment prices. We can genuinely put people entering these schemes in a difficult situation where they may face problems if the money from the sale of an apartment is insufficient to pay off the remaining debt.
Here, of course, we need to restore order. What pleases me is that just recently a mortgage standard was approved, albeit only after lengthy discussions. Thank you to the banks for reaching an agreement on this, and we hope that this standard will be adhered to. We still need to develop a supervisory standard with you.
But in parallel with this mortgage standard, we will also proceed to increase provisioning for loans that involve a sharp increase in payments, especially after a long grace period. Because many schemes currently attracting people involve initially low payments that rise sharply after certain periods or conditions. You remember that we limited mortgages from developers through increased reserves, but now, with the increase in the key interest rate, the significance of this measure has decreased. We will fine-tune it so that it is effective under new conditions.
I want to emphasize again — I am not saying this for the first time, but when the time comes, this will probably be the last time, sorry — if such schemes proliferate, we will persistently ask the legislator to approve the mortgage standard from which banks will not be able to deviate. That is, they will only be able to issue according to the products explicitly stated in the law. This, of course, will narrow the possibilities for banks but will protect borrowers’ interests if we, as the banking community, cannot do this ourselves together with you.
Another segment requiring standardization is auto lending. Auto lending is growing, but we are also seeing an increase in complaints. There is a rise in the imposition of services. Sometimes vehicles are simply not sold without a loan, or if they are sold without one, they become more expensive. Moreover, the loan can only be obtained with additional services that cannot be returned.
I will give an example because it illustrates how different kinds of fantasies are at play: a car buyer for 170,000 rubles buys a service contract, which is also accompanied by a book on a flash drive. Only 9,000 can be returned for the service, while 161,000 cannot because, according to the law, books are non-returnable. They found this loophole in legislation to impose services that a person cannot return.
Banks tell us that car dealerships are twisting their arms in this manner. Car dealerships are not under our supervision, and so it seems banks are not to blame here. It seems to us that this state of affairs is being accepted deliberately. There are banks (and thank goodness there are such banks) that are severing relationships with such car dealers. In other cases, however, banks are, in essence, the drivers of such schemes.
Banks can certainly control their counterparties, that is for sure.
We will work on this together with the Consumer Rights Protection Agency. I wanted to just warn those who are still using these practices to eliminate them before we come together with the Consumer Rights Protection Agency. Therefore, a standard for auto lending is needed. I hope that the banking community will reach an agreement on this faster than on mortgages.
And such problems, I warned right away that I would be raising problematic questions today, include tricks in online lending. When a single checkbox is sufficient for a person to sign consent for data processing and on top of that a credit card. There is pushing towards paid services in online lending.
What is most outrageous: when it is time to sell, everything is digitized and instantaneous. However, when it is time to return the money legally, the person must go in person to the office, and for some reason, the banks’ digitization disappears. In other words, digitization works when it comes time to sell a product to a person, but when a person defends their rights, for some reason, this digitization disappears from the banks. Of course, this is intolerable.
We will initially release recommendations that will relate to the work of remote channels. But nothing prevents banks from addressing the issues right now. Digitization should not lead to the manipulation of individuals. We will discuss this at our client-centricity conference in November. Last year we held such a conference for the first time, and many participated. There were many declarations of readiness from banks to become client-centric. It would be very nice if this translated into practice.
We are preparing to start publishing a ranking of banks by the level of justified complaints at the end of the year, as we already do with insurers, so that consumers can see which banks are most justifiably complained against for violating consumer rights.
We will also work with Parliament to increase fines for imposition and misselling. Yes, the number of violations has significantly decreased, but they still exist because the fines are practically negligible. In our view, they should be comparable to the benefits derived from the violations.
I want to emphasize that most banks behave responsibly towards their clients. But the unscrupulous practices of some banks are a significant stain on the reputation of the entire banking sector. This affects those banks that behave absolutely honorably. Therefore, we will certainly actively combat such practices.
In conclusion, I would like to move on to a more positive topic — innovations. Our banking sector is truly at the forefront of innovation. One of the most important innovations that both the Central Bank and many banks are working on is the digital ruble.
We have a new milestone ahead. We aim to begin the phase of mass implementation of the digital ruble starting in July next year. We are progressing according to plan. The first pilot stage has been successful. In September, we expanded the parameters of this pilot for the banks that participated from the very beginning. Additionally, another 20 banks are preparing to join the pilot. And we hope that everything will be done. Moreover, we want to legally establish the obligation for banks to gradually conduct operations with digital rubles: first for systemically important banks who are more prepared, then for universal license banks, and then for basic license banks. Likewise, we will also obligate trading and service enterprises to gradually accept payments in digital rubles, just as was done previously for cashless payments.
It is important, and I know that this issue has been raised by small banks, to have the opportunity to connect to digital ruble services, there is such interest, but it is clear that it involves costs. For small banks, these can be significant expenses.
To banks, we are providing a software module for integrating their mobile applications with the digital ruble platform. Additionally, we will work together with the IT sector to develop standard solutions that will allow banks to reduce costs related to upgrading their systems. This is very important for small banks to prepare for this implementation stage.
Neither the business sector nor the banks should face difficulties in configuring payments in digital rubles. Payments will need to be made using the same QR code that is used for payments through the Fast Payment System (FPS). This code will become universal. It will allow payments to be processed with both digital rubles, through the FPS, and through commercial pay services. NSPK has successfully conducted a pilot for this technology with 22 banks. We expect that the universal QR code will become a national standard, similar to the standards of the Bank of Russia’s payment systems, SPFS, and card standards. Therefore, we propose to enshrine in law that there will be only one QR code at the checkout — a universal QR code that must operate on an equidistant infrastructure. In our view, it is vital to make this mandatory by the time of mass implementation of the digital ruble. A draft law is being prepared, and we will discuss it.
Many countries are following this path. We know that a unified QR code standard has been made mandatory, for instance, in Brazil, Indonesia, and Malaysia. Many countries where fast payment services are developed are indeed implementing universal QR codes.
I want to note that all payment solutions and tariff models of banks will remain, including loyalty programs. This will be beneficial for banks. There will be no reduction in the space for you to implement your customer relations systems. Moreover, for small banks, this will eliminate dependence on the decisions of larger players. This will create a fair system. Overall, regarding digital innovations, we will move forward to support this. In particular, you know that we support many initiatives related to digital financial assets. I believe there will be an opportunity to discuss these and other issues in today’s session.
Thank you for your attention!