Central Bank of Russia will continue to encourage banks to reject 'unfriendly' currencies, develop market for 'friendly' ones

MOSCOW. July 12 (Interfax) - The Central Bank of Russia will continue its policy of the deforexation of the banking sector where this concerns currencies of unfriendly countries and to put conditions in place to further develop a market for the currencies of friendly countries, the regulator said in a review of financial market risks, posted on its website.

The Central Bank said it supported the creation of a legal opportunity for a credit institution to charge commission on corporate foreign currency deposits that exceeds the interest rate on the entire deposit amount.

"Sanctions risks associated with keeping significant foreign exchange liquidity within the perimeter of the Russian financial system remain high. To reduce the vulnerability of market participants, it is advisable to diversify the placement of foreign currencies and implement deforexation measures," it said.

The regulator notes an increase in the forexation of bank balance sheets, excluding banks included in the SDN list, in Q2. In liabilities, this was influenced by forex earnings credited to the accounts of exporters and growth retail forex deposits as the ruble strengthened. The growth in the balance sheet forex assets of banks was due, among other things, to the closing of positions with non-residents in the foreign exchange swap market, in transactions with whom Russian banks previously placed excess foreign exchange liquidity.

"In conditions of limited opportunities to hedge currency risk and manage currency position using derivatives, banks are forced to use balance-sheet methods to manage the currency position, including by introducing elevated commission for servicing accounts in the currencies of unfriendly countries," the Central Bank said.