The balances on dollar correspondent accounts of Russian banks abroad as of December 1, 2023 reached their maximum since October 2022. Their value has been growing continuously over the previous five months. Experts point out that international payments are heavily “dollarized” and this will not change soon. The main operations are carried out by subsidiaries of foreign banks in Russia, which are not limited in access to the “toxic currency,” experts note.
For the fifth month in a row, Russian banks have been increasing balances on correspondent accounts in US dollars, according to Central Bank statistics as of December 1, 2023. Thus, balances on correspondent accounts in non-resident banks in US dollars increased to $17.4 billion (a similar volume was observed as of the beginning of October 2022). Overall, over the five months the increase amounted to $3.2 billion, including $0.8 billion in November.
Balances in euro ($6.9 billion equivalent), yuan ($9.1 billion) and other friendly currencies ($2.6 billion) showed slight declines in November. As a result, the total balances of Russian banks in foreign currency correspondent accounts in November fell by $0.4 billion, to $36.9 billion. In parallel, deposits in US dollars of Russian banks in September-November 2023 decreased, falling to $7.4 billion (a year ago banks held $11.3 billion in deposit accounts). The total volume of foreign currency deposits (including in dollars) is $13.6 billion.
According to Denis Taradov, partner of the Unicon auditing and consulting group, the dynamics of the decline in balances of friendly currencies “may rather indicate their demand.” As a rule, banks keep a certain amount in nostro accounts necessary for prompt settlements with counterparties: “The banks predicted that one volume would be needed, but in the end they needed more. Perhaps credit institutions had difficulties replenishing correspondent accounts in friendly currencies, which resulted in a decrease in balances.”
“The dynamics of funds in accounts in non-resident banks is determined by various factors, largely by the situation with the balance of payments,” the Central Bank of the Russian Federation explained to Kommersant. They clarified that “the structure of funds in accounts by currency is determined by the structure of payments for exports and imports, the dynamics of assets and liabilities of banks in foreign currencies, etc.”
In 2022, there was a high current account balance, which resulted in the accumulation of funds in the accounts of credit institutions in foreign banks, the regulator recalls. “In the summer months of 2023, the balance fell to its minimum values, and the volume of funds in the accounts of non-residents decreased,” the Central Bank added. “In recent months, against the backdrop of a recovery in foreign exchange earnings, there has been an increase in the trade balance, which was reflected in an increase in funds of credit institutions in foreign currency.” .
From October 16, 2023, Russian exporters must credit accounts in Russian banks with at least 80% of the currency received and sell at least 90% of the credited proceeds (such rules are provided for 43 groups of companies). The foreign exchange earnings of enterprises and their liquidity for settlements with foreign counterparties largely determine the dynamics of foreign currency balances on correspondent accounts of Russian banks abroad, “all this indicates that foreign trade is ongoing,” notes Yuri Belikov, managing director of the Expert RA rating agency.< /p>
In general, fluctuations in correspondent account balances look quite smooth and do not go beyond the intra-annual range, believes Valery Piven, head of the ACRA financial institutions ratings group. “Settlements in global trade are heavily dollarized, and internal transactions can be dedollarized, but not external ones,” clarifies Mr. Belikov.
Experts agree that there are no significant sanctions risks for Russian banks in this no dynamics. Dollar balances on correspondent accounts in Russia are held primarily by subsidiary banks of foreign financial groups, Mr. Taradov explains, since managing the foreign exchange position in US dollars for Russian banks after the waves of sanctions and the problems that followed them is an expensive business, while foreign banks can easily manage it, for example , due to operations with parent structures.
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