Speech by Elvira Nabiullina at the meeting of the Council for financial market development at the Federation Council
Good day, dear Valentina Ivanovna! Good day, dear colleagues!
Thank you very much for the invitation to speak today.
Indeed, we see that the epidemic of the coronavirus began to decline, the restrictions are gradually removed, the citizens and the business began to return to normal life.
But we must realize that recovery may not be instantaneous, it can take some time, and we must do everything to ensure that this development is based on sustainable grounds.
Government measures in the first place budget measures to support the population and business, limit the scope of the economic downturn this year. As well as anti-crisis measures taken by the Bank of Russia. They allow through the financial system, primarily through large-scale restructuring of loans, to soften the blow for people and businesses.
But the economy needs a wide set of measures that will enable businesses to overcome difficulties, but also to develop more rapidly. The Bank of Russia participates in the implementation of those components of the national plan that are directly related to the financial system: the establishment of long-term funds primarily for investments to support the digital transformation of the economy, project financing and construction, the development of mortgages and increase the availability of financing for the real sector, especially for small businesses, also increasing the protection of consumers of financial services. And at the same time, the Bank of Russia affects the economic recovery through monetary policy, through regulation in the financial sector.
Now we have the ability to reduce the key rate, based on low inflation, which was achieved in previous years. Recall that our inflation target of 4% we achieved for the first time in 2017, and since then its held at a low level. We moved on to the soft monetary policy that supports growth by making money available in the economy. In June, we have reduced, you know, the key rate to 4.5% — a historic low. The data that we received since the last rate decision (primarily on inflation for June and early July), confirm that we still have space for further declines.
I would like to emphasize here that the rate reduction has a greater impact on short term rates and long term vary less, and this makes it more attractive for citizens long-term deposits and, for banks issuing long-term loans. Therefore, our policy not only helps the economy return to its potential, but also aims to improve the offer of long-term funds necessary for the implementation of investment projects and higher growth in the future.
The banking sector was not only able to provide support to borrowers through an ambitious program of restructuring that was needed for both people and businesses, but retained the potential for further growth of lending.
The Bank of Russia adopted regulatory relief that allowed banks to carry out restructuring not only for vacation credit in accordance with the law, but also by their own programs without creating additional reserves. These exemptions apply to 85% of the loan portfolio. Now restructured, to date, loans of nearly 4.3 trillion rubles.
Corporate loans in June rose 0.5%, which is comparable with last year — last year was 0.4 percent. With the beginning of the year growth amounted to 3.8%, and it is also higher than a year earlier — a year earlier of 2.3%. I can not mention that small business loans are growing at a faster pace in five months, a growth of 6.4%. Yes, we certainly understand that this credit growth is the element of involuntary, when the company amid falling revenue take more credits. Nevertheless, we have developed special tools in order to support the banks in such lending. We have a special discount program for small businesses with a limit of 500 billion roubles in the first days is literally launched. Banks get the loans at the rate of 2.5% and has chosen more than 300 billion rubles from this limit. The possibility of restructuring received more than 90 thousand small businesses worth nearly 690 billion rubles — 13.5% of the portfolio.
Retail loans in June gained 1% after very small growth in may — 0.2 percent, and in April we had a reduction in retail loans by 0.7%. In total, the first half of 2020 loans to citizens increased by 4.1%. This is much lower than in the first half of last year — then was 9.7%. But then there was higher growth in consumer lending. We have taken special measures in order to cool this segment and to prevent the emergence of a “bubble” in this market.
Mortgages slowed during the period of the pandemic, as well as other types of lending, but returns to growth, and because of, on the one hand, overall decline, overall decline in interest rates and regulatory relief — we have taken special measures on the mortgage, on the other hand, of course — the state program of preferential mortgage, which in June was granted loans worth more than 100 billion rubles (our estimate at this discounted program now accounts for about half of all new loans mortgage, then there is significant support for such mortgages).
Average mortgage mortgage rate reached 7.4% in may. I will remind that in April of last year it was 10.6 percent, a significant decline in mortgage rates.
Valentina Ivanovna already said that there are a number of interesting ideas, experience in the Republic of Bashkortostan, the Krasnodar region, where in use the housing savings mechanism. Under this mechanism, the people on the special account accumulating funds for a down payment and at a certain level of savings a person receives a mortgage on the terms that were defined initially. On the one hand, a Bank receives steady funding in the form of savings and mortgage rates can be even lower than usual.
In the regions, which use this mechanism, now rates on mortgages with the housing savings somewhere 6-7%. And in our view, it is indeed high time to legally create the basis for wider application of such experience in other regions.
One year has passed since the introduction of the mechanism of financing of housing construction with the use of escrow accounts. Indeed, there has been much discussion and concern. Now almost a quarter of dwellings are constructed on this mechanism. It is 23 million square meters.
Banks increased the volume of construction financing, despite the difficulties associated with the pandemic. From March to may lending to property developers under the new scheme increased by 41% since the beginning of the year 70%.
On June 1, banks and real estate developers issued under the scheme of the treaties at 1.4 trillion rubles. And I would like to pay attention to the interest rates on such loans. We conduct such analysis, survey, and interest rates on these loans for 55% of developers are below 5%, including for the quarter below 1%, when most of the funds already accumulated in escrow accounts, and for the remaining 44% are in the range from 5 to 12%.
Now about new technological projects in the financial sector.
Technology projects allow faster, cheaper, more accessible financial services. And we look at the development of Finance as more than just a fashion trend, but primarily as a mechanism to reduce costs for businesses and for citizens, when they use financial instruments.
The first is the marketplace. Valentina also said, the law last week, was adopted in the third reading in the state Duma. We are counting on the support of the Federation Council to finally complete the formation of the legal conditions for such platforms, because these platforms are really doing a wide range of financial service providers available to people in any region, in any locality. This is an opportunity for people to choose a better and better offer, and for the financial system is, of course, and increased competition.
The law on digital of financial assets adopted in the first reading by the state Duma and, despite several rounds of discussion while not moving. There are a lot of questions. But in order to develop a digital economy, we must understand that it will have new assets, new tools, and they need adequate legal framework. Yes, there are contentious issues, if we did not allow them to continue to discuss, but the basic things should, in our view, to accept, in order not to hamper the development of digital financial assets.
Technologies offer new opportunities for existing tools and this is especially important for small businesses, which often gets to practice stripped-down compared to large companies range of financial products and services.
Last year a law was passed about attracting investment through special platforms credinvest. This transparent and responsible involvement of a wide range of people who are willing to support effective small businesses, to support the launch of promising products. The principle of funding small businesses through credinvest is the location of the enterprises on the investment platform of applications for financing, the company must disclose information about itself and the business project in which funds are raised. Investors — and they can be citizens, and businesses — transferring funds through a nominal account investment platform. Now, within the framework of the national plan working together with development institutions and the Government over the fact that this tool in practice has developed. In particular, in our view, it is necessary to develop a mechanism of compensation for companies of the cost of raising Finance through investmentfirma, as well as the mechanism of guarantee of the development institutions, to improve the reliability of such investments to potential investors.
Investment platforms may also make it more accessible for SMEs factoring. This, too, has much to say. This is a very promising direction, especially for small businesses, who often do not have working capital. But right now, factoring is not used enough and because the regulation is not complete, and because it is often the small and medium business is afraid to sue large companies-customers. In our view, such a platform through the attraction of investors will occur on the security of rights of claim for payment of products major customers.
For this, we, along with the Corporation of SMEs working mechanism of issue and circulation of “factoring” digital rights on investment platforms and a system of registration and storage of the obligations of the customers payment for the products of SMEs.
And finally a few words about the protection of consumers of financial services. The Federation Council always with a special attention to this matter, and for the Bank of Russia is one of the indisputable priorities in the development of the financial market.
And stay I would like to make two points that have yet to implement.
The first is a really long time debating the law on the protection of the unskilled investors. The adoption of this law is long overdue, pull longer. And Valentina said that in the stock market, whose potential has not been fully disclosed, it’s already a lot of retail investors, households, and nearly 2.5 million people have opened an individual investment account. And we cannot allow these people who have not yet had time to gain experience in the stock market, have not received the necessary knowledge, took investment decisions that will lead to loss of money.
Therefore, in our view, the law of unskilled investors need to take. Duma plans to consider on second reading this week. I hope that this will happen. There were a lot of discussions with the professional community. I also agree that it is already balanced, and we also would ask you to support this bill in order for it to adopt.
To support private investments it is very important to maintain the attractiveness of individual investment accounts. We see that a large part of the open investment accounts of the so-called type A, while type B involves a greater amount of tax benefits to investors, but the funds in such account harder to dispose of. We propose to amend the legislation that would give investors the option of partial use, withdrawal of funds from these accounts, those funds that are already more than three years on this account, and if a person takes a mortgage, if he was in a difficult situation, to be able to use part of the funds without closing the account and without losing the right to receive a tax deduction. And also been discussed with the market, we support the idea to increase the limit of the annual fee for the investment account from 1 to 3 million rubles, and also to cancel the limit fees when transferring funds from individual accounts And to accounts of type B.
Another important bill that you mentioned and which is connected with the fight against fraud, especially online. This bill, introduced personally by Valentina Ivanovna and a number of senators, we believe it is extremely important. And here we are asking for your support. The first reading was held in early 2019, but since then almost did not move. If the bill is passed, it will give an opportunity to block fraudulent websites, while using them did not manage to collect huge amounts of money from citizens who are simply unable sometimes to distinguish where the Scam, where scammers, do not give people lose money to scammers to gain access to money and personal data of people.
Strengthening overall security for consumers of financial services on the Internet is a very important aspect of our work. For example, several years ago we started with the “Yandex” to mark these sites of banks and MFIs to pseudotrajectory and phishing sites cannot easily lure citizens. Later, based on this experience, we started to do the markings and other major search engines.
We believe that the entry into the register of the Bank of Russia of all kinds of financial institutions (this is now not the case) gives an opportunity to check who they are dealing with scammers, it becomes difficult to impersonate a civilized financial market participants. Just recently changes were made to the legislation that introduced the requirement to be in the registry for pawn, we believe that a similar requirement should be extended to credit cooperatives that are shared with citizens.
And at the end of yet another initiative to improve the protection of the rights of consumers of financial services. This initiative has caused a lot of controversy, discussions on the market. We are talking about insurance when obtaining a mortgage loan. Now the lion’s share of the insurance premium, remains at the Bank, i.e. the policy’s hidden increase in the cost of the mortgage. The borrower doesn’t even know what part of the money that he paid out to the insurer. It is already for such insurance in the majority of cases, the Bank receives the insurance indemnity. In our view, correctly, that the mortgage was given in the presence of insurance and the insurance contract concluded by the Bank itself, and not a citizen. If something happens to the collateral, then the burden must not be passed on to the borrower, and in case of his illness or death of family members. People should not lose their housing, everything should be covered by insurance. Yes, we know that banks and insurers do not welcome these changes because, frankly, the citizens paid far less than was collected from them. This policy, which is now she is not in favor of customers. And we believe that this needs to change. We will continue further discussion in our opinion, leave it as it is, a man alone with this problem, it is impossible.
In conclusion, I would like to note that the Russian financial market is developing, despite the difficulties that the world and our country is no exception, has experienced the pandemic, the financial sector to cope with challenges, become more flexible, meeting the needs of the economy in different situations, including in times of crisis. And this, of course, would be impossible without the development of legislation. I would like to thank the Federation Council, senators for the active position in the development of financial regulation for the cooperation and the support you provide to the Central Bank on key initiatives. We still have a lot to do to the financial sector really helped the economy, citizens in this period and passing the consequences of the pandemic, and a more sustainable development. Thank you very much.