4 Aug 2022 13:03

Central Bank recommending that govt ask state cos to convert funds held in currencies of non-friendly countries

MOSCOW. Aug 4 (Interfax) - The Central Bank of Russia has published further steps for the deforexation of bank balance sheets.

The proposals are contained in a paper for public discussion on key areas for the development of the financial market under sanctions.

The regulator proposes to supplement the existing system of buffers for risk ratios for forex loans and securities with new ones, some of them differentiated and taking into account the issuer of the currency - unfriendly states or countries that are not unfriendly.

In addition, the Bank of Russia will assess the feasibility of establishing higher required reserve ratios for bank liabilities in "toxic" currencies. To reduce currency risk, banks should gradually phase out the use of "toxic" currencies evenly on both sides of their balance sheets. Regulatory measures that discourage the use of currencies of unfriendly countries can also be applied to non-bank financial institutions.

The Central Bank says additional measures may be required to discourage the use of "toxic" currencies by companies in the real sector.

"It is advisable for non-financial organizations to convert accumulated foreign exchange funds in the currencies of unfriendly countries into other currencies. With regard to companies with state participation, the issuance by the Russian government of the relevant directives (recommendations) would be justified," the paper said.

Similar government recommendations may concern the need to refrain from using the currencies of unfriendly countries in new contracts, and where this is not possible in a tight deadline, the inclusion in contracts of terms that allow claims to be enforced in rubles or the currencies of friendly countries.

The Finance Ministry said when commenting on the Central Bank proposal to issue directives to companies with state participation that it shares the concern that Russian companies have savings in unfriendly currencies and together with companies is implementing various measures to diversify foreign currency assets and taking steps to restore imports.

In the ministry's opinion, however, state companies recognize the risks of accumulating such currency and are working to reduce it in close contact with the Bank of Russia and the Finance Ministry. "In our view, directives are not yet required," the ministry's press service told Interfax.