Herman Gref: ‘We could easily afford to hand 20% of GDP out to people’

“Is it time to withdraw money from Sberbank or am I late?”

The Q&A session opened with quite an unusual move — “as a Sberbank depositor” head the State Duma’s Committee for Budget and Taxes Andrey Makarov asked Gref the most popular question in the Net and that was “concerning everybody”: “Is it time to withdraw money from Sberbank or am I late and should I have done this before the interview began?” the interviewer was ironic.

“Mr Makarov, you are late to bring your last money because Sberbank is the most reliable place for your money today,” Gref replied with a smile. According to him, nowadays nothing is threatening Russian banks, as the current economic crisis caused by the coronavirus epidemic isn’t a bank crisis. Of course, a “third wave” will indirectly affect lending organisations as a part of the economy, but not first of all.

Even under the worst-case scenarios for the Russian economy, Sberbank won’t need a state financial aid and will save profitability, Gref claimed. At the very beginning of the COVID-19 epidemic, there were considered three scenarios, the third of which is a so-called stress scenario. It envisaged a fall in oil prices to $10 per barrel and to zero during some periods. The prices would recover only later this year, but only at $20-25, a GDP would fall by 15%.

“And even in this case I won’t say the numbers, Sberbank has kept its profitability, and of course, even in this variant, we don’t need any support from the state. Thank God, we’ve gone through all crises with our resources. Even the worst stress scenario hasn’t brought us to a complicated situation.”

Today the consensus forecast of Sberbank economists, according to Gref, looks the following way: a 4,5-5% fall in Russia’s GDP. This forecast is now considered as “basic scenario” and it doesn’t exclude dramatic consequences for the banking sphere, Gref concluded.

“Kudrin didn’t say that”: state won’t touch bank depositors’ money

The head of Sberbank commented on the most high-profile rumour last week too, which is a statement of head of the Russian Accounting Chamber Aleksey Kudrin. In a recent interview, Kudrin talked about a mechanism of “help” to the economy with the money Russians keep in Russian banks as deposits — the savings in the country total about 30 trillion rubles at the moment. And the country can borrow it from banks as loans.

The quite an opaque statement was immediately considered as the announcement of almost an upcoming withdrawal of money from the Russians’ accounts — some mass media published reports citing the “wild 90s” and urged to immediately withdraw money from deposits. Kudrin rushed to deny such hypotheses and stressed that he meant an investment of natural persons’ deposits in state bonds by banks as a profitable way for them to invest free money.

During the interview, Herman Gref again denied the possibility of withdrawing money from bank depositors’ accounts by the state.

“Firstly, Kudrin didn’t say that, he meant another thing. Such a situation is impossible,” he assured. “Unfortunately, such a situation once happened in our history during the Soviet period. And I think that this situation was such an injection for all politicians so that nobody will ever repeat this experience. To be honest, such conditions for this simply don’t exist now. From a perspective of the macroeconomy, the readiness of the state for this kind of situation, we look much better than the most developed countries,” Gref emphasised. The head of Sberbank says that deposits cannot be frozen or forcedly transferred from one currency into another.

“If a flood is inevitable, one has to spend the rest of the time before the flood to learn how to live underwater”

The peak of COVID-19 in Russia will be from 5 to 10 May, epidemiologists and analysts concluded after creating a mathematic model of the situation in Russia and other countries hit by the pandemic, Herman Gref said. There is an over 50% probability that the crisis caused by the epidemic and paralysed the world will stretch into 2021. A talk with head of Russia’s consumer protection watchdog Rospotrebnadzor Anna Popova made Gref think of such a conclusion, he admitted.

“My fears have been confirmed. And if we understand that it is a long horizon, we should honestly tell people that it is quite a probable scenario, and this scenario isn’t as catastrophic as we think at first sight but quite acceptable. There is a good joke: if a flood is inevitable, one has to spend the rest of the time before the flood to learn how to live underwater. We should assess the situation in the long-term.”

This means that, first of all, functionaries and regulators should change their requirements to “close everything and everybody” and make up other safe methods of work that will allow companies to “live”, while businesses should invent new business models.

“If a businessman understands that a restaurant won’t open during the next year, he shouldn’t wait out or maintain his employees until 1 May somehow, while a miracle will happen on 1 May, and everything will be back, and he will open, you should become online. You perhaps should reconsider your work. Can the kitchen work online? What about the hall? No, people can’t eat in masks. You maybe should switch to a “dark kitchen” — when you prepare and deliver food to clients,” Gref illustrated.

“If all your spending is in rubles, you should better keep money in rubles, of course”

During the talk, Herman Gref gave Russians a series of tips, particularly he advised them to have savings in rubles if they spent most of the money in the Russian currency. According to Gref, the current forecasted inflation level, which is now below 4%, favours this too.

“It is necessary to worry about the stability of every currency: the dollar, euro, ruble or Swiss franc. And this is why if you have considerable savings, it is better to create the so-called currency basket. If all of your spending is in rubles, the money should be kept in rubles, of course. I don’t see any problem with the inflation level we have today, and today we have had the level below 4%,” the head of Sberbank explained.

Why did the government purchase Sberbank from Central Bank?

It was officially announced on 10 April that the government purchased a controlling Sberbank stake from the Central Bank: the government holds now 50% plus a share for 2,14 trillion rubles from the National Wealth Fund. Moreover, first, according to Finance Minister Anton Siluanov, the block was assessed higher — over 2,5 trillion rubles.

Gref and head of the State Duma’s Committee for Budget and Taxes Andrey Makarov also talked about the essence of the deal for each side during the interview. Answering a question of the latter, the head of Sberbank stressed that he had nothing to do with the decision, while the government was obviously at an advantage after the deal.

“It isn’t our decision. It is impossible to approve or disapprove what you cannot influence. It wasn’t our decision but a decision of the government, the Central Bank and you, deputies, in the end, this is why I can ask you this question,” Gref replied to Makarov.

“We considered that the mega regulator couldn’t be simultaneously the owner of what it regulates, and we had been talking about for many years. From the perspective of what happened, not the lawmakers’ stance is needed here. As the chairman of the budget committee, it is very important for me that the government, the federal budget got money to the National Wealth Fund — a fantastic asset with profitability that no assets would provide <…> The amendments allowed this during a crisis from a perspective of opportunities,” Makarov replied.

“Do you mean the government paid for Sberbank much less than it costs?” Gref was ironic.

“Yes, it’s true, we saved money, but I said that we shouldn’t be asked for this,” the head of the State Duma’s Committee for Budget and Taxes shrugged his shoulders and admitted.

“I often see the question asked on social media why the government spent so much money. Here we should explain that actually the money was transferred from the National Wealth Fund to the budget because the budget received the whole sum from the Central Bank except 200 billion, which was left to cover the current loss of the Central Bank. For the government, it is only a profitable deal. The money from the NWF, which was accumulated there in the currency, would anyway be converted and sent to the budget, while now it was transferred to pay for the Sberbank stake,” Herman Gref ended the discussion.

“Its management issues and a negative effect exceed potential pluses of this tax collection”

The government’s measures to keep the pandemic and support the Russian economy during the crisis became the final topic of Gref’s big interview. So the head of the Sberbank talked abruptly about the introduction of a tax on interest income from Russians’ bank deposits and investments in securities over a million rubles, which was announced by Vladimir Putin on 25 March.

“I am not a fan of taxes in general. I don’t think taxes should rise. And if you are asking for my point of view, I wouldn’t introduce such a tax. I think that its management issues and a negative effect exceed potential pluses of this tax collection,” Gref expressed his view. “But if we are talking about international experience, most countries have such a tax. This is why those who imposed the tax, they cited the international experience. But I am saying once again: I wouldn’t impose such a tax at this moment.”

In general the head of Sberbank evaluated the actions of the government during the first months of the epidemic in Russia positively, first of all, talking about the timely closure of borders with China in early January, preventive measures.

“We got those saving 1,5 months of a pause that allowed others to act. In this sense, it was strategically very correct and calculated actions of our power, but today it has to be working under unimaginable stress, overload. And in general I think that both the premier and his team as one of the most effective among the government we have seen in the last 20-30 years,” Gref claimed.

Why isn’t the government handing out money to Russians during the crisis like the USA?

Gref also expressed his opinion about the question that can often be found in social networks and petitions now addressed to the government and president: why the Russian authorities didn’t announce a financial aid to its citizens with one-time or monthly payments like in the USA and some European countries.

“We don’t have limitations because of the debt amount, ours is 15% of GDP (it is very little). In this sense, we are one of the most favourable countries in the world. In this sense, we could easily afford to hand 20% of GDP out to people. But, unfortunately, there are limitations on the other hand,” Gref claimed. “We don’t have such a market source of money like the USA and EU do. If the United States of America can afford to issue $3 trillion of debt quickly, place them in the market among the world’s investors and use them in their economy, we have limitations on this.”

The head of Sberbank stressed that the limited resource dictates the necessity of choosing other supporting measures, more targeted ones. “I think that we can spend up 10% of GDP to overcome the crisis, to help people,” he added.