Central Bank of Russia postpones plans to introduce forex liquidity ratio

MOSCOW. Jan 30 (Interfax) - The Central Bank of Russia has postponed its plans to introduce a foreign currency liquidity ratio, as banks' appetite for foreign currency risk has declined following tighter sanctions, Central Bank Director of the Banking Regulation and Analytics Department Alexander Danilov said during a press conference on the results of the banking sector's development in 2024.

Central Bank Deputy Governor Olga Polyakova previously said in September last year that the CBR was planning to introduce the foreign currency liquidity ratio. Foreign currency risk continues to impact banks' activities, she said.

"We indeed considered introducing such a ratio [for foreign currency liquidity], but the situation has changed. Sanctions were imposed, and as we understand it, banks have since lost any significant appetite for increasing foreign currency assets," Danilov said.

"At this point, we are in no rush at all; we are evaluating whether this is even necessary. We are leaning more towards adjusting foreign currency positions rather than introducing a foreign currency liquidity ratio," he said.

The CBR initially considered introducing the ratio due to the growth of foreign currency loans and banks' increased attraction of foreign currency deposits, he said.

"We were somewhat concerned about whether banks were properly assessing their risks. We held meetings and discussions with them, including on the potential introduction of financial ratios. Banks themselves realized the risks even before the sanctions were expanded, and foreign currency lending growth had already stopped, which was one of the reasons we did not rush. But after the sanctions were tightened, banks' appetite for this diminished entirely," Danilov said.