Elvira Nabiullina: ‘The banking sector has been actively financing the economy and is now in good state’
Sochi is hosting the 20th anniversary International Banking Forum these days, the main topics of which are the prospects of the financial sector and the technological transformation of banks. Speaking at the event, the head of the Central Bank, Elvira Nabiullina, announced a possible record profits of credit institutions, overheating of the mortgage market, and an increase in fines for imposing financial services. Read the details in the material of Realnoe Vremya.
About mortgage
From October 1, 2023, the Central Bank is going to increase the allowances to the risk coefficients on mortgage loans. Most of all, they will grow on loans with a low down payment and for lent borrowers when buying real estate under an equity participation agreement. This will be done to limit the risks of mortgage-takers and credit institutions.
In general, the Bank of Russia sees signs of overheating of this market, said Elvira Nabiullina. Over the past 12 months, mortgage issuance has increased by 30%.
“This is a high rate. And here, of course, we are concerned about the quality of loans and their impact on the housing market. It is not the availability of mortgages that is important for our population, but the availability of housing. We are also concerned about a gap between housing prices of the primary market and the secondary market, unfortunately, it persists," she said, noting that the Central Bank will continue to monitor the quality of mortgages and will take tougher measures if necessary.
The obvious schemes in mortgage lending are gone, the head of the Bank of Russia said, but its elements remain.
“Banks offer very low rates not for the entire term of the loan, but for one or two years to attract a consumer who does not fully understand what the cost of the loan is. We need to adopt, we are working on it together with you, the mortgage lending standard. I expect that all banks will comply with it. This standard of mortgage lending closes existing schemes, blocks them," Nabiullina said.
About the key rate
The board of directors of the Bank of Russia at its meeting on September 15 raised the key rate by one percentage point to 13%. This has been the third increase in a row. Then the Central Bank reported that inflationary pressure remains high:
“Significant pro-inflationary risks have been realised: the growth of domestic demand, outstripping the possibility of expanding output, and the weakening of the ruble in the summer months. In these circumstances, it is necessary to provide additional tightening of monetary conditions to limit the scale of the deviation of inflation upward from the target and its return to 4% in 2024.
Today, the head of the Central Bank said that decisions on the key rate will depend on the development of the situation, as there is a lot of uncertainty now. In particular, the regulator will look at what effect the decisions already taken have on inflation.
“As soon as inflation stabilizes closer to our target (4%) and as this happens, we will be able to reduce the rate to the so-called neutral range (5,5-6,5%). We believe that by 2026 we will come to it," Nabiullina said.
About banks' profits and their support
As for the banks themselves, their profit by the end of 2023 could reach a record 3 trillion. Let us remind that in 2022, it collapsed to 200 billion after 2,4 trillion in 2021.
“The banking sector has been actively financing the economy and is now in good state. The profit has already accumulated 2,4 trillion rubles. According to our estimate, it can be up to 3 trillion rubles," said the head of the Central Bank.
Despite such indicators, the regulator continues to discuss the feasibility of creating a fund to support the banking sector.
“Each bank has buffers individually, but, in our opinion, when shocks occur, the banking system as a whole needs such reserves, collective capital buffers, and if banks have difficulties, these buffers can be used. They can be used as an early warning mechanism," the head of the Central Bank said.
The regulator estimates the capital stock in the banking sector at 6 trillion rubles.
“This is an assessment without taking into account the indulgences," said Nabiullina.
About the imposition of financial services
Meanwhile, the Central Bank is concerned about the growth of complaints about the imposition of financial services. Elvira Nabiullina said that many banks quickly bring a new product to the market, but “the problem of restoring violated rights is solved for months”.
“It is absolutely incomprehensible to us. And some banks say that we have a profit from what we mis-sold, much more than the fines that we can pay. We are currently preparing proposals for a bill that will increase fines multiple times for this kind of thing," the head of the regulator said.
There is such a problem in online lending, where there are cases of purchases of unnecessary services.
“Including the practice of confirmation by SMS, verification codes, when a citizen is given a loan with a huge amount of insurance, and a person does not realise that by SMS confirmation he simultaneously approves this insurance. There are such cases. This is a direct violation of the law," Nabiullina stressed.
In the spring, according to her, the regulator revealed a number of violations in the sale of insurance and investment products by banks.
“Especially in large banks. And we will repeat these checks in the autumn, and if we find repeated violations, then this time we will apply these tough measures," she added.v